Social Security pays a monthly benefit to millions of older Americans. But in just over 10 years, the benefits seniors are used to collecting could get slashed.
That's clearly problematic. And the fact that lawmakers are dragging their feet in addressing Social Security's revenue shortfall is downright troubling.
Image source: Getty Images.
The clock is ticking
Social Security's main funding source is payroll tax revenue. In the coming years, the program expects to owe more money in scheduled benefits than it collects in payroll taxes as baby boomers exit the workforce and start filing their claims.
Social Security has trust funds it can tap to keep up with scheduled benefits for a limited period of time. But once those trust funds run dry, benefit cuts will be on the table. And as of earlier this year, the program's Trustees projected that Social Security's trust funds would be empty by 2034. That means Social Security cuts are a real possibility in roughly a decade.
That's disturbing in its own right. But what's perhaps even more troubling is that lawmakers seem to be dragging their feet in actively talking solutions.
Yes, President Biden has proposed imposing Social Security taxes on workers earning $400,000 or more to pump more money into the program. Currently, earnings above $160,200 aren't taxed.
But for the most part, we're not hearing a ton of talk about solutions to Social Security's fiscal woes. And while lawmakers might think they have time to address the problem at hand, the reality is that the clock is ticking down on those trust funds running dry.
What's also a problem is that certain proposals that might be implemented to shore up Social Security's finances could impact future retirees -- which means they deserve their fair share of notice. One idea that's been floated before is to raise the full retirement age (FRA), which is the age when seniors are entitled to their full monthly Social Security benefits based on their respective wage histories.
Right now, FRA is 67 for anyone born in 1960 or later. Lawmakers may opt to push FRA to 68 or 69. But if that's the case, then shouldn't they make that call sooner rather than later since it could easily impact the retirement plans of people who are currently in their late 50s?
Lawmakers need to get moving
It's unclear as to how lawmakers will address the problem of Social Security's funding shortfall. But what is clear is that if they don't act sooner rather than later, they're going to have a major problem on their hands.
It's also possible that lawmakers won't be able to find a solution that prevents Social Security cuts at all. And that's something today's workers need to brace for.
For the most part, the best defense against Social Security cuts is building a large amount of retirement savings. Seniors who are less dependent on their monthly benefits won't get hurt as much if those payments don't end up coming in at their full amount.
This begs the question of what current retirees can do in light of Social Security cuts. That's a tougher question to answer. And unfortunately, lawmakers don't seem to be in any position to address it.
