Social Security to Run Dry By 2035. Why Isn’t Anyone Providing Solutions?

Social Security is one of those issues that many in Washington D.C. don’t want to talk about because the solutions are not going to be popular. There are no easy solutions but since no one in D.C. is actually providing real solutions, I will.

Beginning in 2020, Social Security costs will exceed income, with the $2.9 trillion dollars currently in reserves being depleted by 2035. Starting in 2035, Social Security will only be able to pay out around 80% of the benefits that they have promised, unless significant changes are made before then. The longer we wait, the more severe and painful those changes will be.

Social Security was never meant to be something where we spend 20-30 years or more living off of. When Social Security was created in 1935, the average life expectancy for those born that year was only 61.7 years. The age to begin collecting Social Security was 62 meaning that most people didn’t even live to be able to collect Social Security and if they did it was only for a few years. And that was for those who were born in 1935. If you were born prior to 1935, the life expectancy was even lower.

Today, the average life expectancy is around 80 years, and the average person will receive about a third more back from Social Security then what they paid into the system. The longer you live, the more that gap widens. That is clearly unsustainable and the problem has been decades in the making. The problem is no one has been willing to do anything, and have only been kicking the can down the road for decades. That road is quickly coming to an end.

Since no one in Washington is going to propose any real solutions, I will. I will propose compromises where both sides should be able to come together and agree on. Compromises where the people that need Social Security the most will not be affected and that will benefit everyone else when they go to retire.

  1. Allow those who would rather save for retirement on their own to opt out of paying into and receiving Social Security. On average, people my age can make far more in private retirement accounts throughout our lives then we can make off of Social Security. We shouldn’t be forced to pay into a system that is clearly broken and risk not having anything when we go to retire. Considering that the average person receives back more then what they pay in to the system, this will help take some of the pressure off, and help those who really need it.
  2. For those who choose to opt out of Social Security, pass a law requiring those people to contribute that money to some sort of Retirement account, such as a Roth IRA or 401K. Penalize those who don’t contribute to a retirement account the required amount. For example, if you make a $40,000 per year you will end up paying $2,480 into Social Security each year, and your employer pays another $2,480. Under this system, you will be required to contribute that $2,480 into a retirement account, but you get to choose if you would rather pay into Social Security and leave it in the government’s hand, or if you would rather contribute that to a private retirement account. Your employer will then contribute the potion that they are required to pay to the account that you choose.
  3. Significantly raise the contribution limits for Roth IRA’s. The current limit for 2019 is $6,000, up from $5,500 in 2018. Raise that limit even more. Raise that limit to $10,000, plus whatever I am required to pay into Social Security that year. For example, if I made $40,000, I will be allowed to contribute my original $10,000 (as long as I made at least $10,000 in taxable income), plus the $2,480 I was required due to Social Security. My employer would then contribute $2,480. That means $14,960 would have been contributed to my Roth IRA that year if I were to contribute the maximum amount.  
  4. For those who want to stay with Social Security, slowly start raising the full retirement age. You are currently able to start accepting Social Security benefits at 62 with a penalty. The longer you wait to accept, the less of a penalty you have to pay. The current full retirement age is 67. If you are 50 or older, keep benefits and the current retirement age where it is. If you are under the age of 50, start slowly raising the age that you can start receiving benefits to 65 (with a penalty), with the full retirement age being 70. This will help to offset some of the costs of people living longer. If we move to begin fixing this now, we don’t need to make any drastic changes, and that age can be raised slowly so that it doesn’t disrupt peoples lives. For example, it’s not unreasonable to ask someone who is currently 49 and expected to start receiving full benefits in 18 years (at age 67) to have to work an extra month or two. It is not unreasonable for someone who just turned 40 and not expected to need Social Security for 27 years, to have to work an extra 6 months or a year before they can receive the full benefits.
  5. Put Social Security under a lock box where that money can’t be used for anything else but Social Security. Under the current law, Social Security can lend money to the government for other purposes. They are then given an IOU by the government while the government goes and spends like drunken sailors. Put those funds under a lockbox, where it can’t be used for any other purpose other then the workers retirement.

You might not agree with all of these solutions, but they are solutions which is a lot more then what you are currently getting from our politicians. They are solutions that neither side might fully agree with but solutions that will save Social Security for future generations.


More from Mikula Wire