Without Fixes, Social Security Benefits Would Drop to 1950s Lows

It’s a refrain that Americans approaching their retirement years have heard for years now: Social Security is poised to run out of reserve cash in 2034, which could potentially trigger a sharp decline in benefits. But a recent research brief implies that a solution could be simpler than many in industry observers imagine — assuming Congress can somehow agree on a compromise.

Writing for the Center for Retirement Research at Boston College, director Alicia H. Munnell summarizes the most recent 2017 Trustees Report, which presents the state of the Old-Age, Survivors, and Disability Insurance (OASDI) trust fund. 

“The bottom line remains the same,” Munnell writes, noting that the exhaustion year of 2034 has not changed for several years. “Social Security faces a manageable financing shortfall over the next 75 years, which should be addressed soon to share the burden more equitably across cohorts, restore confidence in the nation’s major retirement program, and give people time to adjust to needed changes.”


Munnell, a Boston College management professor who has advocated for the use of reverse mortgages as a part of some Americans’ overall retirement strategies, makes the somewhat surprising assertion that fixing the problem is easy — and that the “problem” itself wouldn’t be as devastating as it seems at face value. 

“The exhaustion of the trust fund does not mean that Social Security is ‘bankrupt,’” Munnell writes. “Payroll tax revenues keep rolling in and can cover about 75 percent of currently legislated benefits over the remainder of the projection period,” which stretches all the way to 2091.

Still, that would mean that recipients’ Social Security income would decline to levels not seen since the Eisenhower administration: Instead of covering 36% of a 65-year-old worker’s pre-retirement earnings, Munnell writes, that number would drop to 27%, its lowest point since the 1950s.

For the tax wonks out there, Munnell then dives into detailed plans to fix the coming crisis, including a Republican-sponsored proposal to cut benefits, and a Democratic-led effort to raise payroll taxes. She concludes that they “bracket the range of options,” presenting two extremes with the answer likely falling somewhere in the middle. 

“These are useful bookends, highlighting that policymakers need guidance about how Americans want the burden of fixing Social Security allocated between benefit cuts and tax increases,” Munnell writes. “Finding a mechanism to communicate those preferences to Congress is the big challenge.”

She ends on an optimistic — perhaps overly so, given the current political climate — note.

“Once the preferred allocation is determined, filing in the specifics is relatively easy,” Munnell writes.

Read her full brief here.

Written by Alex Spanko

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  • Reading this article makes me sick, this should never have come to this.

    Ever since President Johnson, back in 1967, convinced congress to pass the bill allowing the borrowing of money’s from the social security fund, it has been going broke!

    This is our money, the Federal Government borrows from us, they never pay us back and now we are the ones paying for it!! Makes a lot of sense, right?

    Seniors have been taking a beating for years now and it is not going to get any better, unfortunately!

    At least all of us in the reverse mortgage space have the opportunity to all we can to help and be their as much as we can for our seniors!

    John A. Smaldone

  • The potential damage spelled out for the future of our seniors should make everyone reading it, furious!

    We all need to write our US congressman and US senators and make it known that social security is not an entitlement, all those that have worked all those years and contributed deserve their social security income retirement treated like any other pension.

    Any senior on or about to be on social security should NOT be facing the fear our Federal Government is causing so many seniors of today!

    How many of you will actually write your congressman and senators about this upcoming threat, how many of you will actually take action in defense of our seniors on this subject??????

    I wonder who will step forward?

    John A. Smaldone

    • John,

      Here is where we disagree.

      Social Security is an entity. To the extent that cash exceeds working capital needs, why not employ that cash within the government as long as it is covered under the interagency’s agreement regarding interest to be earned on transferred funds? A careful accounting is made daily on these accounts on the books of Social Security. To the extent that money has been taken out of Social Security, the rest of government owes Social Security both the principal borrowed as well as any and all accrued interest exactly as reflected on the books of Social Security.

      No one is robbing Social Security of anything. The problem is and remains that Social Security has been far too rich in benefits to its beneficiaries. For example, my grandfather was older when Social Security became law. He retired at 65 in 1955 and lived to be 96. His contributions were under $20,000. His benefits including Medicare which he did not contribute a dime to, exceeded hundreds of thousands of dollars.

      The problem has been Congress. It knows that the contributions plus earnings on them were never sufficient to keep the program running forever. This whole idea about a contract with the American people and Social Security being a trust fund which would leave the program fully funded was less than truthful from its start.

      For the country and for the sake of current employers, cutting back on benefits is a necessity. It will not affect me except to the extent I will NOT receive the more than generous COLA raises my granddad did. The changes will affect my children and grandchildren.

      This is what occurs when government underfunds a program from its inception and use unrealistic earnings assumptions to justify greater and greater benefits to beneficiaries. One political party has been notorious for their increased benefits without proper funding just as FDR intended without any concern for how things would eventually turn out. Other than Senator Goldwater and a few notable others, the other political party has not been wanted to be seen as a killjoy or party popper except when it benefited them. Ah, American politics at its finest. Now we have reached the years in which to pay the piper and no one likes it.

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