May 9, 2024 By Gary Boatman 4 min read

Every year the trustees of the Social Security Trust Funds issue a report about the solvency of these accounts. Last week, they issued a new report that added one more year to the expected life of the trust funds. They will now be available until 2035. While this was a one-year improvement from last year, it is still troubling news and is even more dire than at first glance.

The extra year of availability was credited to a stronger economy and more people working and paying into the fund. It is troubling that 2035 is only 11 years away. A little more concerning is that there are two funds, one for disability payments and the other for monthly Social Security checks that more than 70 million seniors rely on. By law, these two funds cannot be combined, and the retirement funds run out a year earlier in 2034. At that time, it is estimated that seniors will only receive 83% of their monthly check. These funds would come from current taxes being paid into the system. This would be devastating to millions of people.

When Social Security was created in 1925, it was not infused with government funds. Instead, it was designed as a program where current employees would contribute to the benefits received by retired workers. This system worked well for many years because the math behind it was favorable. The working population was growing, creating more contributors, and life expectancy was shorter. Initially, benefits were only paid to the retired worker and not their beneficiaries.

Like many government plans, benefits were later added for things such as spousal and survivor benefits. Health care and working conditions improved, along with longer life expectancy, and this created a bigger drain on trust fund balances. Today, 10,000 baby boomers turn 65 every day. Many other industrial nations are also experiencing a growing senior population and slowing birth rates.

We faced a similar crisis in 1983. The trust funds were on course to run out of money in several years when President Ronald Reagan and House Speaker Tip O’Neal reached a compromise to save the system. That was when the age to begin Social Security was slowly raised from 65 to 67. Also, at that time up to 50% of Social Security income became subject to income taxes. Those changes, made in 1983, have carried us for almost 50 years.

Today, politicians on both sides of the aisle play games with Social Security. Some say that we should greatly expand the benefits. You could not responsibly increase your spending at home if you are running out of money. Extremists on the other side suggest cutting benefits. This would not be fair to all of the people and their employers who paid into the system. Social Security, Medicare and similar mandated programs consume around 50% of the federal budget, so this is a major cost and concern.

There is probably a solution to this issue if we look at 1983 for guidance. Any changes will be phased in over an extended period of time. Since life expectancy continues to improve, raising the age of younger citizens is likely to happen. This is not a benefit cut as opponents like to claim. It would not affect anyone receiving Social Security or within a few years of doing so. Most people receive way more benefits than they paid into the system. Things such as which cost of living index must be discussed, and the tax rate paid by both workers and their employers will likely rise. Maybe 100% of Social Security will be subject to income tax for higher income beneficiaries.

All of these changes could be agreed to quickly if Washington stopped playing games. The sooner the issues are resolved, the less severe they will need to be. Social Security is too important to let this debate continue. Encourage your elected official to get the job done now!