A Letter to Congress about Social Security

We need a solution

If nothing is done, the Social Security we know now won’t exist in 20 years. That’s not to say that Social Security won’t be around or that people will stop receiving benefits; it’s to say that it will be different from how it is currently.

Right now, people who worked the appropriate amount of time to receive benefits (40 quarters), and were taxes accordingly along the way, would wind up receiving what they were entitled to.

2034, the Social Security Trust will be out of money. Social Security won’t run out, there just won’t be any money in the reserve fund. At this point, benefits will most likely receive a ¼ cut across the board. (Source)

All that said, something needs to be done. If this generation truly wants to leave the earth better than it received it, we need to make a change.

Why our elected officials won’t step up

Our elected officials won’t step up because it would hurt their chances of getting reelected. The reason being is the solutions to the problem are not favorable. Though drastic measures now need to be made, it seems people are unwilling to make them.

I think another reason behind this is how partisan politics has become. Even if a member of Congress or a whole party drafts legislation that could fix the problem, I believe the opposing party would use it against them. They would lobby to the population that’s in our near retirement by saying that “they’re going to take away your Social Security,” and so on.

One hope I do have, but don’t have high expectations for is a bill that was recently drafted by a Republican Senator to establish term limits on members of Congress.

I don’t think it’ll pass because they’d be voting themselves out of a job, but if it were to pass, it would incentivize politicians to draft meaningful bills and legislate to make things better.

They aren’t doing that now. They speak for their party. They legislate for power, for control. Obviously, there are good people in Washington, who want to do good and help improve the country, but that’s not what we see in the news.

Why is the program in trouble?

I believe there are only two answers to this question.

1. We are having fewer kids — Generations before our current one were having 4+ kids. That means for every person that retired and collected Social Security, there were at least 2 to fund their Social Security check.
2. People are living longer — Social Security is designed for you to start collecting and collect until you die. This worked great for the program (I know that sounds bad). People would work for multiple decades, paying into the system the whole time. Then they’d retire at 65 and collected Social Security for 10 years, and pass away. Now people are living well into their eighties and nineties.

We need to:

1. Increase the full retirement age — It’s currently at 67 for people born after 1959. It was 65 until Social Security ran into a funding issue in the 80s. With people living longer, this is a viable option.
2. Increase the income limit for SSI and Medicare taxation — Currently, the maximum income eligibility for this tax is $132,900. I recently read a suggested bump to $230,000, which would cover 90% of earners.
3. Decrease the monthly benefit — Cut benefits. If nothing gets done, this will happen anyway. I don’t think it’s necessary because there are better options available, but, nevertheless, it’s an option. 21% cut to benefits may be needed to sustain payouts through 2090. (Source)
4. Increase the amount taxed to each individual — Currently, 6.2% of every paycheck is “taken” as a tax for Social Security, Medicare, and Medicaid. A 1% increase, for someone earning $50,000 per year would increase your withholding by $500. If you’re paid bi-weekly, that’s roughly $19 per paycheck.
5. Take the government completely out of it. Leave saving for retirement up to the people — I don’t think this option would ever see the light of day, but some conservatives and libertarians would like to see it. I, for one, don’t think people are responsible enough to do it on their own, but maybe without the government there as a crutch, they’d be more willing to save for their own retirement.
6. Let the people pick their own investments — As it stands right now, the Social Security reserve fund invests in Treasury bonds. Extremely safe, but pays very little interest. Give citizens the ability to take control of the money they’ve paid into the system. As with the last possible solution, I don’t think this is a good idea either. Generally, in investing, people let their emotions cloud their judgment. Hindering their abilities and decreasing returns.

Conclusion

Whatever solution is ultimately proposed will receive massive amounts of backlash, but something needs to be done. The Social Security program we know now is at stake and so many people rely on it to make ends meet. Unfortunately too many. We need to fix it.

To learn more about how to use Social Security effectively and/or for information about saving for retirement on your own, send me an email!

Other sources

https://www.fool.com/retirement/2017/04/17/30-stunning-social-security-statistics.aspx

https://money.usnews.com/money/blogs/planning-to-retire/2014/11/14/5-potential-social-security-fixes