Is Social Security Going Away?
Since 1935, Social Security has been a factor in an American’s plan for retirement. Since 1954, people have also assumed the program would provide a livable wage if they became too disabled to support their families. However, in the current age, there is deep concern among Americans that Social Security will no longer be a realistic option for either financial situation.
Many people think the large number of Baby Boomers (the generation born in the years after World War II) reaching retirement age is stressing the Social Security System, allowing the system to go bankrupt. However, the actual problem with funding is the drop in the birthrate around 1965. Women began to average only two children a piece instead of three. In other words, instead of three workers feeding into the Social Security system, now only two worders pay into it, bringing revenues down.
The Future of Social Security Disability
The Social Security Administration says that the Social Security Disability Insurance program is increasing in costs and declining in income, threatening insolvency in 2023. At this time, the fund will only be able to pay out 89 cents for every dollar owed. The root cause is the growing number of people receiving benefits relative to the number of workers paying into the Disability Trust Fund. Also, the American population is aging, and people are more likely to become disabled as they become older. The number of SSDI beneficiaries per 100 covered workers is projected to grow by more than 40 percent between 2004 and 2030, from 4.8 to 6.8 per 100.
Politicians Will Protect It
The possibility of Social Security actually being totally defunded by Congress is unrealistic because politicians are, well, politicians. The fact that a large portion of the American voters depend on their Social Security income to retire or to support them in case of disability is never far from the minds of representatives and senators.
“Members of Congress like to get reelected, and if Congress voted Social Security out of existence, the likelihood of its members getting reelected would probably not be very good,” explained Stephen Goss, chief actuary of the Social Security Administration.
The responsibility of saving Social Security Disability lays on Congress. Several of their options include:
- Altering the benefit formula or eligibility rules, ensuring that fewer people qualify for SSDI benefits,
- Increasing the share of payroll taxes that go directly into the Disability Insurance Trust Fund as they did in 1994 when the SSDI fund faced insolvency,
- Raising overall payroll taxes,
- Increasing the tax base, allowing FICA to be based on more than the first $118,500 of earnings.
About one out of every three SSDI recipients is already living below federal poverty level. A cut in the scheduled benefits could mean very significant financial hardship for disabled people who depend on SSDI to protect them and their family from financial ruin. Whatever the solution chosen, there is no question that Congress must act to protect its citizens who have paid into this system with faith it will be there when they need it.
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“Why Social Security Isn’t Going Away,” Kiplinger
“Trends on the Social Security and Supplemental Social Security Income Disability Programs,” Social Security Office of Policy
“Social Security Insolvency: When and What to Do,” Forbes
“Disability Insurance Fails Short-Term Solvency Test Even After Transfer from Social Security,” The Heritage Foundation