Rosalind Evans
Social Security has just celebrated its 89th anniversary, a milestone that highlights its longstanding role in American life. Established on August 14, 1935, under President Franklin D. Roosevelt, the Social Security Act aimed to provide a safety net for older Americans. However, as the program approaches its ninth decade, concerns about its future viability are intensifying, especially with the upcoming November presidential election.
The Looming Trust Fund Crisis
The Social Security trust fund, essential for paying retirement benefits, faces a troubling forecast. Projections suggest that the fund could be depleted by 2033 if no significant changes are made. This impending issue has sparked widespread anxiety among Americans. A Gallup poll released in June reveals that 80% of Americans are either “worried” or “extremely worried” about the future of their Social Security benefits.
Justin Rush, a financial planner from Novi, Michigan, reassures that while Social Security may face challenges, it is not on the brink of collapse. “The reality is that, after that time, assuming nothing is done in the meantime, retirees would only receive around 83% of their benefits,” Rush said. He emphasizes that despite the depleting reserve funds, the program will continue, albeit with reduced payouts.
Raising the Retirement Age
Since its inception, the retirement age for full Social Security benefits has evolved. Initially set at 65, it was gradually increased to 67 by a 1983 law. Recently, proposals have emerged to raise the retirement age further. Kevin Hern, Chair of the Republican Study Committee, suggests increasing it to 69. Rush supports this idea, noting, “I think raising the age is a pretty frictionless way to start getting that equation more balanced.”
Americans can still begin claiming benefits at age 62, though earlier claims result in reduced monthly payments. The debate over adjusting the retirement age continues as lawmakers seek solutions to balance the program’s financial health.
Adjusting the Payroll Tax
Currently, the threshold for Social Security payroll tax in 2024 stands at $168,600. Workers above this threshold stop contributing after paying a maximum of $10,453.20, with their employers matching this amount. Some Democrats propose eliminating this cap, extending payroll taxes to earnings over $400,000. Critics argue this could lead to disparities in benefit payouts. Rush highlights this concern, saying, “If we take the cap off this now, we’re going to weaken that link between the amount that you’re paying into it and the amount that you receive once you retire.”
The Impact of Population Growth
Demographic shifts also challenge Social Security’s sustainability. The U.S. population has surged from 123.2 million in 1935 to over 331.4 million. Rush points out, “The overall aging of our population is certainly a huge risk to how everything is set up.” An increasing number of retirees and a shrinking base of contributors exacerbate the fund’s depletion. Without legislative action, this trend will likely continue.
Extended Life Expectancy
When Social Security was established, the average life expectancy in the U.S. was in the early 60s. Today, it has risen to the late 70s. Hern notes, “You’re living [more] years on a program never designed to … be that way.” This extended lifespan means individuals draw benefits for longer periods, adding financial strain to the system. Rush observes that many younger Americans are preparing for a future without Social Security, reflecting a shift in financial planning strategies.
Looking Ahead: A Bipartisan Challenge
The future of Social Security is a pressing bipartisan issue. Rush believes both political parties must address the program’s sustainability. “I think it is in both parties’ best interests to figure out some solution,” he said. As the program approaches its 90th year, finding effective solutions will be essential to ensure its continued viability.
