I will be 68 years old in 2034. That’s the year that the latest Social Security budget forecast says it will start to run out of money and be unable to pay its full benefits. I will only have been receiving the benefits for 1 year at that point.
Related: Social Security Running Out Sooner Than Expected
It may not seem like an urgent matter, but management of SSI is a slow moving, demographic train wreck. The numbers in the Administration latest report are appalling. There has been no ‘fixes’ attempted since Reagan was in office. The story sharing this latest, dismal forecast was relegated to a lonely two paragraph blurb on page 14 of our metro paper.
Perhaps we’ll see what political will there is for reforming the current system when Medicare starts to run out of money in 5 years … 2026. That’s 2 years into the next Presidential term, so I will hope that these underfunded entitlements will be a key election issue for the first time in decades.
Then again, I’m not real hopeful. Are you?
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MrFireStation 
Because the Federal Government has been borrowing from the “Trust Fund” for decades, the only fix will be increasing taxes on younger workers to “repay” the fund. I am not confident the SSI we thought would be there – will be there. The first thing they will do is cut benefits for higher income households – those that saved, invested, and planned for retirement.
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I agree with Chris’ representation that Government has been spending excess funds from early in our career that should have been kept separate and earmarked for Social Security. Investing in safe US treasury is not an investment either. It is simply another name for the government spending the money and issue an IOU AKA as Treasury Bonds. The problem with this approach is that the increases the debt.
The only real solution should have been investing the excess funds. There are two ways the government could have done this. Buying down the US debt would have been one way. The other is investing in the market.
Separate accounts that could be invested were suggested multiple times as a fix and the Demonrats shot this down by falsely claiming investing in the market was dangerous. The status quo is a government run Ponzi Scheme.
Dr. Jeremy Siegel on his 70th birthday in honor of his starting Social Security Payments published an article in the Wall Street Journal. He calculated that if his and his employer’s contributions had been invested in the market throughout his career, his Social Security Payments would be three times what he was receiving and his children would likely have something to inherit. If the Government continued running Social Security as an annuity with no inheritance they would actually make a 50% profit on Social Security.
Enough about what should have been done. The big question is how do we keep our promises to those who have already paid in without screwing our children with excessive taxes that provide even smaller benefits when they retire. The answer is probably a hybrid approach that continues paying the current retirees while transiting our children to accounts they own and are invested to provide them with a good benefit when they retire.
As a parting comment, the USA cannot simply increase the worker pool by importing new workers to grow their way out of this problem. Low skill workers do not earn enough to pay sufficient taxes to cover their government services. As a country we need policies that are family friendly so we have more grand children.
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Yes – I too have seen quite a few articles showing how much our social security contributions would be worth if they had been invested in the market. If you gave people the chance to ‘opt out’ of the program, I’m sure many young people would. Unfortunately, the Left has vilified those proposals in the past. I’m not sure what political rhetoric will emerge to forge a ‘fix’..
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Cutting benefits for higher income households is relatively easy politically, but won’t solve the problem. The question is what will be the political story used to get young people to pay more in?
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Chief, I will place neither trust nor even hope in the entrenched duopoly that grasps our nation in a strangle hold. Willy nilly, they focus on spending trillions that can never be repaid, while neglecting past promises like Social Security that they never properly funded.
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Maybe the Treasury will have to sell special Social Security Bonds to debt-fund retirees. Borrowing is much easier politically than raising taxes.
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Social Security is a welfare program. The initial design was to keep the elderly out of poverty. It should be means tested. If that bothers some, than we can lower the level which above such, income isn’t subject to FICA tax, I think it currently is $106,000. I receive a government pension and while I paid enough quarters to receive SS, my check at age 67 will be small. I do some consulting now which I pay FICA tax on which will boost that amount but it isn’t significant.
My wife received her first payment from SS last week. We don’t need it. What will we do with it? Travel and fund grandchildren 529 plans. Remember the intent of SS was to keep the elderly out of poverty and relatively small numbers of recipients lived long after Full Retirement Age(FRA).
FRA has crept up over time, but the next move will have to be a means test for new recipients as it is a political disaster to cut current benefits. It is a bigger political disaster to try to raise FICA taxes, it won’t happen
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It may have to become a welfare program, but it wasn’t constructed as such. I’ve read that there are some legal issues to making it means tested in the future. Also, I’m not sure how people will react to the idea that they are now “on welfare” if they get a SSI check. That may come with a social stigma that they resent, or people may be beyond that after all of the CV19 handouts.
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Chief,
Your article timing has a bit of irony. Today, it was announced that Social Security will run out of funds in 2033 caused by less workers paying into Social Security during the pandemic.
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I work hard to provide BREAKING NEWS! 😉
(I saw that headline last night!)
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The solution to Social Security will require people with a basic understanding of arithmetic working together, which seems to be lacking from the civil serpents who populate our Federal Government. I would pick almost anyone who participates in your FIRE forum over anyone in government. All of us have used arithmetic to retire early and well.
My fear is once again the solution will be another version of “screw the rich” which really impacts the upper middle class who populate this forum.
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“Civil Serpents” 🙂
I agree the middle class will likely bear most of the load. The rich take care of themselves and the poor can’t contribute enough. I think it was Milton Friedman who said that every government program ends up being paid for by the middle class.
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This is such a great and helpful post! I always have a hard time figuring out what to get my teenage nephews but this guide is so useful! Thank you!
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