"We need to look at the American people and explain to them that we're broke," Boehner (US Senator, John Boehner) was quoted as saying recently in The Pittsburgh Tribune-Review. "If you have substantial non-Social Security income while you're retired, why are we paying you at a time when we're broke? We just need to be honest with people."
I think that quote is about as clear an indication as we will get from a politician about Social Security. The system is quickly charging toward insolvency unless significant changes are made. A stark fact that has almost gone unnoticed by the general public is that social security (tax) revenues fell below benefit costs this year with the economic crisis, as more people retired early and fewer workers were paying in benefits. Something needs to be done quickly.
Here are some of the thoughts that have been proposed, and my two cents on each:
Increase the normal retirement Age to 70--This one is sort of a no-brainer. It has been the typical response so far out of Washington. Clearly, as life expectancy increases and the ratio of workers to SS beneficiaries decreases, the age to claim retirement benefits will need to increase.
Increase Early Retirement Age--People can and do claim a reduced retirement benefit at age 62. If there is a need to raise the normal retirement age, then clearly there is a need to raise the age to claim early retirement benefits. Given that current projections are for SSA to exhaust payouts by 2041, this seems a likely change in tandem to the increase in the normal retirement age.
Tie Cost-of-Living Increases to Wages--Consumer price index is a traditional measure of inflation (tracking the price fluctuations of a basket of non-durable consumer goods). Actual wages have grown at a much slower rate over time, and this could effectively slow down the amount of benefits paid out of the trust.
Working Longer-–Currently, full Social Security benefits are attained through working 40 quarters; with a quarter being defined as $1,120 of earnings. I could conceivably see two potential ways to change this: one in increasing the number of quarters, or two in changing the dollar amount that qualifies for a quarter.
Raising the taxable wage base--$106,800; that’s where current taxes for social security revenue purposes stop. Meaning anyone who earns a dollar over that amount, that dollar is not taxed for social security purposes. This seems like another no-brainer, given the dire state that the Social Security trust is in.
I am unsure what it will take to make a significant step toward fixing the system. More than likely it will take a bold move by Congress, and mix and match of these and other suggested changes. With an impending insolvency and an economy that is not forecasted to grow at break-neck speed, clearly something must be done.
