"Funds currently in the trust fund will be spent out in 25 years," said PJ Eric Stallard, a research professor of sociology.
Let's first understand what our Social Security program does for us: it keeps retirees out of poverty and replaces income from previous work, according to The Economist.
The Economist argues that our current program worked in the past, but needs to be changed in order to compensate for the fact that our senior population is growing.
More retired women are receiving benefits and more workers have become eligible for a refund, according to Emily Brandon in U.S. News and World Report. The percentage of workers eligible for a refund has increased from 3 percent to 6 percent during the past 74 years. This happened because these workers are earning more than the maximum amount that is taxable to Social Security.
Stallard does not characterize our current Social Security program as being "right" or "wrong," but he believes that "something needs to be done; adjustments need to be made for it to run indefinitely."
"Our current program is a transfer program where funds are transferred from [workers] to [retirees]," Stallard said. "The new generations work to benefit the new retirees."
The bad news is that today's workers may only be able to pay 70 percent of the retirees' benefits instead of 100 percent, Stallard added.
What can be done? Stallard says that there are three options and that we (through Congress) can pursue any combination of them:
"One could increase the tax rates or lower the benefits or do a combination of the two. To give the program a higher credit, one can increase the fund on deposit or do a combination of the three."
According to Don Taylor, an associate professor of public policy, our options are to enforce one or a combination of two reform ideas:
- Raise the taxable income, raise the age of retirement to 70 (low income workers would be exempt because of their shorter life expectancy) and increase the payroll tax so that 90 percent of workers’ wages eligible for calculating Social Security benefits are taxable, or
- Cut a percentage of new retirees’ benefits upfront, and allow the benefits to gradually increase over 20 years, so that as retirees get older, their savings will also increase.
Although Taylor admittedly prefers the second option, he says that enforcing either reform will result in reforming health care—once Congress handles Social Security, they would then be able to address the issue of health care costs.
Passing a reform plan for Social Security in Congress will help move us closer to long range economic stability, Taylor said.
The Economist accepts that the financing is what needs to be fixed and that the sooner it is fixed, the less it will cost. Getting rid of our program for a fully funded one would cost more.
Many people agree that our Social Security program needs to be reformed but Stallard emphasizes that "adults should understand the financing problem [in order] to make a decision on how to address it. Only then can a reasonable decision be made."
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