One of the few things Americans agree on is that Social Security is a necessary government program.
Unfortunately, Social Security will hit a financial wall in 2033 unless either the benefits are reduced or delayed or more taxes are collected.
That’s a prospect that doesn’t thrill many Americans — particularly those over the age of 50.
A recent poll finds passionate opposition to lowering Social Security. They were equally opposed to increasing the age for full eligibility from the current age of 67.
“I contributed to it. It’s my money,” said 65-year-old Joan McDonald, a recently retired accountant. “The plan was, ‘Contribute this and you get this.’ You can’t change the rules.”
Not necessarily. The first people who received Social Security payments contributed little to nothing. Even now, most people receive more money from Social Security than they contributed.
The rules simply have to change.
They’ve changed many times since the program’s inception.
Social Security was established in 1935 during the Great Depression as a retirement program. Taxes for the program were first collected in 1937 but by 1939 — a year before the first payments were even made — it was morphing into a program to serve as a safety net as survivor benefits were added. Disability benefits were added in 1956.
Doing nothing is a bad option. It will cause benefits to be cut in or around 2033 when the Social Security Trust Fund runs out of cash.
People are living longer than when Social Security was established. The program has expanded. And the number of retirees is going to balloon soon as baby boomers retire.
It’s not whether changes to Social Security are made, but how and when.
We understand the angst of those who do not want benefits cut or the eligibility age increased. Social Security has to be something that can be counted on, a specific amount of dollars people will receive at a specific age.
Those polled didn’t like any option, as in approved by more than half, except raising the cap on income taxed for Social Security, which is now $113,700 a year.
We would agree that’s the right direction.
Social Security is now financed by a 12.4 percent tax on wages, half paid by employers the other by the employee. But the tax only applies to the first $113,700 of a worker’s wage. Lifting the cap eliminates about three-fourths of the projected shortfall.
Other changes to Social Security will have to be made. However, the sooner big changes such as lifting the wage cap are made, the easier it will be to get a grip on the problem.