Social Security’s Clock Is Ticking. Why It’s Not Getting Fixed.

Published May 8, 2024

The nearly 70 million Americans who collect Social Security checks can rely on scheduled benefits until 2033, according to the annual trustees’ report released by the Treasury Department on Monday.

These prospects haven’t materially changed over the last 30 years. Over that time Washington has unwisely watched the program move closer to insolvency inch by inch, increasing the probability of a benefit reduction for those who depend upon the program.

This wait-and-see strategy has left those now approaching retirement in the lurch, unsure of how much money they will have coming in. A 2023 survey by the investment firm Schroeder’s found 44% of those now approaching retirement plan to claim benefits prior to their full-retirement age because they lack confidence in the program’s ability to pay the bills.

For these people there is no need to wait until 2033. The crisis is here right now. The consequences of the decision to let Americans twist in the wind will play out over decades for those unfortunate enough to live into their 90s.

Doing nothing is not a solution. To illustrate, purely as a matter of the passage of time, the program generated over the course of 2022 roughly $800 billion in promises that it does not expect to keep. In 2023, the program added another $800 billion to the tally of empty promises. This is the cost of doing nothing.

Social Security is vital for older Americans who lack options to generate extra income when income levels fluctuate. For many of these people the only solution to falling income is a falling standard of living.

While policy experts nominally talk about “across-the-board” benefit cuts of a specific amount, there is no certainty in how Social Security will work once the trust funds are exhausted. No one actually knows how the program might allocate the systemwide benefit cut to the individual.

To illustrate, it is entirely possible that without direction from Congress that the Social Security Administration will pay benefits in full in arrears. This approach would mean that retirees would get paid in full, but not on the promised day. So a younger worker today might claim benefits at 62 and receive the first check at 65.

For those approaching retirement, these possibilities should be unacceptable now, rather than when the first check doesn’t arrive.

As the first step in Social Security reform, Congress needs to provide all Americans a framework for how benefit reductions might work in the case of insolvency so that they can plan as individuals. It is best to prepare a plan for a rainy day when it is not raining.

No one needs this information more than current seniors. At this point, someone who is 80 expects to outlive the program’s ability to pay scheduled benefits. That person would be around 89 when insolvency arrives. It is incredibly irresponsible to give false hope that a future Congress might accomplish what the current lawmakers have been unable to do.

Even today, there are people who insist that the way to go financially is to delay claiming of benefits to 70, even if someone has to use-up his or her retirement savings in the process. But if those future political alchemists fail, it will leave that delayed claimant to discover at 80 that the source of income he or she was counting on is no longer reliable.

Voters need to separate the problem from the consequence. Congressional inaction today is the problem. It enables people even well into retirement to misgauge the gap between what they need and what they will receive. The consequence is a forced reduction in the standard of living of the people who have the least ability to adapt to economic change.

For politicians today, the political calculus of Social Security is limited to looking for a mix of benefit cuts and tax increases that pay for a program that voters love. For the rest of us, the math is a patchwork of guesses at what might happen when Congress can’t find the mix.

Photo by AFGE. Attribution 2.0 Generic.