You and I have worked responsible jobs for decades, and as good citizens we’ve contributed a princely sum to Social Security during that time.

But that’s okay because we have a contract with the Social Security Administration. We agreed to give them our hard-earned money and they promised to pay us a predictable annuity stream when we retire. In fact, every year they’re kind enough to tell us the exact amount we can expect.

A deal’s a deal, so we can rest easy and retire with confidence.

Or can we?

Now they tell us that by 2034 Social Security will be insolvent. Their reserve fund will be depleted and our annuity stream will drop by 24% or more. Further, the Coronavirus crisis will almost certainly advance the date of insolvency by several years.

That’s not the deal I signed up for, and I’m sure you’re not too pleased either. Somebody needs to fix this. And soon!

Well, they can fix it. Easily. But our leaders refuse to act.

And that means you and I have to kick them in the ass.

A dystopian Sherwood Forest

The Social Security Administration (SSA) acts like a well-organized Robin Hood. Like clockwork, they take 6.2% from your earnings and a matching 6.2% from your employer and give it away to qualifying retired and disabled individuals, many who desperately need every penny to survive.

Some call this a “contribution” but it’s not — it’s a tax. The SSA does not invest your money and give it back to you later, they’re giving it to other people right now. Your retirement benefits will come from taxes taken from future hard-working Americans in your retirement years.

In 1960 there were five workers paying SSA taxes for every retiree claiming benefits. Today there are three. As birth rates decline and legions of baby boomers march into retirement, by 2030 there will be just two workers per retiree.

In 2030, only two workers will be funding a single retiree’s income

Robin Hood and his Merry Taxmen are already running out of rich workers to steal from and to keep the poor peasants of Sherwood Forest alive, they’ve started raiding their reserve fund.

Yes, the Social Security Administration has a reserve fund. In the jolly old days of yore, when there were five workers per retiree, the SSA set aside some of the money for a rainy day. They didn’t touch it for decades, but the worker-to-retiree ratio is too low now, rainy days have arrived and spending now outpaces taxes. The fund is dwindling.

In time, it will be gone. Then it’s too late.

Social Security is not going bankrupt

The word “Insolvency” means “inability to pay obligations”. It is often associated with bankruptcy and an inability to pay ANY obligations. But that’s not true in this case.

With Social Security, “insolvent” means they can’t pay ALL their obligations. The expectations are, when the surplus is gone, they will have enough income from workers to pay 76% of their obligations.

In other words, in 2034 (or sooner) recipients like you and I will get a pay cut of 24%. That sucks, but I suppose it’s better than losing everything.

In 2010:

• For the first time, interest income earned by the reserve fund had to be redirected to meet obligations.

In 2017:

• The reserve fund stood just shy of $3 trillion.
• 62 million people received SSA checks totaling $952 billion in annual benefits.
• Funding came from 174 million workers who contributed $911 billion.
• The shortfall grew to $41 billion — which came out of the $85 billion in interest earned on the reserve fund.

In 2018:

• Interest income no longer covered the shortfall, and the reserve fund itself began to decline.

In 2020:

• 65 million Americans shared over a trillion dollars in Social Security payouts.
• The reserve fund will drop to $2.6 trillion.

In 2030:

• The ratio of workers-to-retirees will flatten out at about 2:1 and remain that way for the foreseeable future.

In 2034 (or sooner):

• The reserve fund will be fully depleted.
• Income will come ONLY from current worker taxes.
• Those taxes will provide 76% of promised benefits.

Inaction = suffering and death

If nothing is done, our retirement income will be 24% less than promised. So what? I can chop off some corners and squeak by. Perhaps you can too. But what about those who have no more corners?

Almost half of all elderly singles rely on Social Security for 90% or more of their income.

Social Security benefits represent more than one third of the average elderly Americans’ income.

A 24% drop would reduce the median retiree benefit from $1,503 to $1,142, a loss of $361 a month. For many, that amount is the difference between paying rent and eating — a choice no one should be forced to make.

Americans will die. They will suffer. Many will become involuntarily homeless.

Who are the Villians?

Republicans and Democrats are equally responsible. Congress and the Executive branch are equally responsible. We are collectively responsible. There are no heroes, and everyone is the villain.

Our leaders are failing us: The kind folks who elected them.

They’re failing us because they don’t have to act. They’re weak and spineless, and we’re not forcing them so there are no consequences for legislating without a brainstem.

We’re to blame too.

“We The People” are more concerned with coronavirus, Kardashians, and circadian outrage. And while we’re distracted, we enable our feckless leaders to practice their sleight of hand in hopes that the next congress of toy soldiers will fall on their swords instead. And so it goes.

There are simple choices and easy solutions and all of them hurt.

The options suck, but they’re all we have.

Act now and it’s going to hurt.

Wait, and it will hurt a lot more.

Solvency means higher taxes and lower benefits

The law requires the SSA to provide financial benefits to eligible recipients. They can’t arbitrarily adjust payments to different groups or individuals — they must treat everyone the same. Therefore, to solve the impending crisis, they need to find an acceptable and equitable combination of: 1) Raising taxes, and 2) Reducing benefits.

This is no grand revelation or groundbreaking insight, however.

The US Congress and president are reminded of this problem every year. Since 1941, a report from the Social Security Board of Trustees has been prepared with clear vision of the current and future state of the program. The 2020 edition is the fourth report presented to our current president and his administration, and once again, like his predecessors, they’ve chosen to take no action.

Doing nothing is a deliberate choice to allow elderly, ill, handicapped, and poor to suffer and die. Surely, the leaders of The United States of America are compassionate enough to solve this problem.

They can raise taxes:

• Raise the earnings cap. In 2020, no SSA taxes are taken from earnings above $137,700. Six percent of wage earners make more than that and eliminating the cap completely would reduce the shortfall by 20%, postponing the crisis to 2055.
• Create a sliding scale so higher earners pay a higher percentage, stretching the solution even further.
• Raise other taxes such as Estate or Income. A modest increase to any of these, contractually earmarked for Social Security, would defer the problem for decades.
• Increase the SSA payroll tax percentage — for businesses and/or individuals — to fund benefits for another decade or more.

They can reduce benefits:

• Raise the retirement age. In 1940, retirement age was the same as the average lifespan. Now we live decades longer. Raising the age limit would be highly unpopular to many but would reduce the shortfall by at least 20%.
• Cut benefits immediately so the cuts are thinner over time. This could reduce the shortfall by 50% or more, but would be unexpected, politically unpopular, and painful. Cutting benefits on a sliding scale would lessen the impact on those more vulnerable.
• Reducing the cost of living adjustment would reduce the shortfall by up to 25%, but disproportionately affect those with the greatest need.

We The People

We can do something about this, and we should.

First and foremost: VOTE!

Then send an urgent plea to your House Representative. Find them here. Tell them to “Take Action NOW.”

Above all, assume the worst and take care of yourself

With all the political diversions and prestidigitation, you shouldn’t count on a solution anytime soon. Here’s what you can personally:

1. Reduce your expenses and start saving more! Financial shortfalls are the top concern of retirees, and it’s important to get started now.
2. Get a side hustle to generate some additional cash. Real estate, writing, consulting, teaching, or any hobby that you enjoy. Not only will that set you up for greater financial cushion, but you’ll also have something to keep you engaged in your retirement.
3. Consider living somewhere less expensive in your golden years. I’m considering part-time retirement living in Mexico, but there are plenty of inexpensive destinations in the US and other countries.

Remember:

• Social Security is not going bankrupt
• Nobody is doing anything about it so ‘we the people’ must do something
• There is an enormous sense of urgency
• Inaction hurts
• VOTE!