According to the Social Security Administration, approximately 56 million people depend on Social Security (OASI) for their retirement. For about half of older adults, it provides at least 50% of their income, and for one in four older adults, it provides at least 90% of their income. In addition, it offers social insurance protection to workers who become disabled and to families whose breadwinner dies.
In July, the Social Security Board of Trustees reported that Social Security benefits will be depleted by 2035. Because Social Security has been a cornerstone of economic security for almost 90 years, its financial challenges are disconcerting. If the trust funds are depleted, benefits would be reduced by 20%.
Social Security helps reduce the economic disparity between older white adults and older adults of color. Hispanics and Blacks have lower earnings and less opportunity to save than whites. Their poverty rate is 2.5 times as high as for white seniors.
Social Security is especially important for women because they tend to earn less than men, take more time out of the paid workforce, live longer, accumulate less savings, and receive smaller pensions. Women represent more than half of Social Security beneficiaries in their 60s and seven in 10 beneficiaries in their 90s. In addition, women make up 96% of Social Security survivor beneficiaries.
Many employers have shifted from traditional defined benefit plans, which guarantee certain benefits upon retirement, to defined contribution plans that pay benefits based on a worker’s contributions and the rate of return they earn. Therefore, Social Security has become the only source of guaranteed retirement income that is not subject to investment risk or financial market fluctuations.
An article written by The Peterson Foundation, “The Ratio of Workers to Social Security Beneficiaries is Low and Projected to Decline Further,” highlights that the number of workers to beneficiaries is insufficient.
There are three primary reasons why the ratio of workers to beneficiaries has declined.
- The number of children born to a woman has declined to 1.6. To put this in perspective, in 1960 it was 3.6. The decline in the fertility rate means that the working generation is getting smaller relative to those receiving benefits.
- The rate of immigration to the United States has declined in recent years.
- More Americans are getting older and living longer. In 1960, a person living to 65 was expected to live until 80. Today, that person is expected to live to 85.
The Peterson Foundation gave several ways that Social Security could be reformed to ensure a sustainable future.
- The federal retirement age could be raised to 70 from the current age of 67. This would decrease outlays by $72 billion over the next several years.
- Lawmakers could raise the tax rate or adjust the cap on income subject to payroll taxes. Currently, the maximum taxable amount is $147,000. The Congressional Budget Office estimates that raising the cap to $250,000 would raise more than $1 trillion over a 10-year period.
My father died when I was 19. I received Social Security benefits that helped me pay for a considerable amount of my college education.
The failure of lawmakers to address Social Security’s shortfall will stir righteous anger on the part of all Americans. Workers and their employers have been legally bound to contribute significant sums for decades in anticipation of receiving specified benefits. Failure on our government to live up to these promises is a fundamental breach.
Sadly, lawmakers have dropped the ball on addressing Social Security. They have been aware of the long-term financing shortfalls for years. Hopefully, on a bipartisan basis, legislation will be passed to shore up its funding as it touches the lives of every American, both directly and indirectly.
Originally published in the Sarasota Herald-Tribune
