Social Security -- It Ain't Broke, So Don't Break It

Social securityAs Huffington Post reported last week, AARP is planning a "salon style" invitation-only gathering in Washington later this month. In this DailyFinance exclusive, two retirement experts propose dramatically different solutions to the Social Security crisis. Below, Dan Caplinger weighs in. Click here to read Chuck Saletta's take on the topic.

Everyone's predicting the worst for Social Security. But should the threat of cuts that are still a quarter-century away really have people in a panic today?

Apparently, some members of the AARP think so.

AARP created a big controversy last year when it appeared to open the door to a "grand bargain" that would trade current benefits for a more secure program going forward. Now, as Huffington Post reported last week, the membership organization is planning a "salon style" gathering in Washington later this month, which several proponents of cuts to Social Security will attend.

But if I were invited to that gala event, I'd suggest that a grand overhaul is overkill. A better idea is to leave the program mostly unchanged.

All that is really needed to fix the problem are some simple tweaks that would improve the program's sustainability going forward while leaving it mostly unchanged for those who receive benefits now.

Much Ado About Nothing

Now don't get me wrong. I haven't been shy about considering big changes to Social Security. Ideas like taking away Social Security benefits for the rich through means testing or letting participants have more flexibility about when and in what form they take their benefits are worth considering, at least to determine whether they'll actually have a material difference on benefits.

Moreover, the worst-case scenario admittedly sounds bad. Losing a quarter of benefits once the Social Security Trust Fund runs out in 2036 would undoubtedly be problematic for some people.

But even amid the gloom-and-doom mentality, there are some things to be optimistic about:
  • Younger workers are already planning for Social Security not to be there when they retire. Last year, a poll revealed that half of those ages 18 to 29 don't think Social Security will exist at all by the time they retire. Only 5% think it will pay the same benefit levels it does today. Past polls have shown similar skepticism among those of all ages. That realistic sentiment makes it more likely that they'll be able to handle a reduction in Social Security benefits.
  • Demographically, the crisis in Social Security won't last forever. The coming retirement of the baby boomers will be the point of maximum stress to the system. Once the less numerous generation after the boomers comes through, a more populous millennial generation will be better able to support the program. Stopgap measures to get through the tough times could be easier to accomplish than a full-scale revamp of the program.
  • Finally, despite the trend of cutting payroll taxes, small upward adjustments to tax rates or wage thresholds remain viable options at any point. Increasing revenue could resolve problems without major changes.
Compared to such minor tweaks, some of the more extreme proposals open to debate seem like a gross overreaction. For instance, as colleague Chuck Saletta notes in his piece about fixing the problem, the nation of Chile uses a format similar to the private-account idea proposed in the U.S. in the past. Similarly, the Thrift Savings Plan gives government workers a number of smart investment choices to let their retirement savings grow.

Those programs have their upsides, especially when those investment choices perform well. But the advantage of Social Security is its guaranteed payment feature -- something that most workers no longer get from traditional employer pensions or other sources. And after a decade of bad performance from the stock market, no one's going to get too excited over the prospect of gambling away their last bastion of retirement financial security.

The Answer: Stay the Course

It's natural to want to take action to save something as important as Social Security. But even in the face of what looks like a big problem, drastic measures aren't always the best. By preserving the basics of Social Security rather than scrapping it in favor of a completely different program, the government stands the best chance of an orderly transition to a more economically sustainable method of giving retirees the financial stability they so badly need.

Click here to read Chuck Saletta's take on the topic.


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One action that should be taken regardless of whether Social Security were to run a deficit is to increase the age eligibility. Since Social Security was enacted in the 1930's people have become healthier in their 60's and the workplace has become less physically demanding. Consequently, the age of eligibility should gradually be increased to age 70 of the next 15 -20 years. The same should be applied to Medicare. While this will not solve all of the shortfalls, it will certainly help.

March 27 2012 at 9:33 PM Report abuse rate up rate down Reply
Carly EngageAmerica

Social Security ran a cash flow deficit of $49 billion in 2010, and the 2011 trustees report indicates such deficits will be the norm by 2017. The report also reveals that Social Security’s unfunded obligation stands at $9.1 trillion, in net-present-value terms; in other words, it owes $9.1 trillion more in benefits than it will take in through taxes. The program will experience further financial strain as the worker-to-retiree ratio keeps falling. Medicare faces a 75-year unfunded obligation of $34.8 trillion, in net-present-value terms, and must be reformed if we want to ensure that younger generations have quality health care when they retire.

March 27 2012 at 12:35 PM Report abuse +1 rate up rate down Reply
Joe The Economist

"But the advantage of Social Security is its guaranteed payment feature "

There is no guarantee. That isn't my opinion it is the opinion of the Supreme Court. Flemming V Nester 1960. This author is seriously misleading the readers. Here is a link to SSA on the subject. The key statement can be found at the bottom : "In its ruling, the Court .. established the principle that entitlement to Social Security benefits is not contractual right" There is no guarantee.

March 27 2012 at 12:33 AM Report abuse rate up rate down Reply
Joe The Economist

"Younger workers are already planning for Social Security not to be there when they retire"

This writer is completely disconnected from reality. Pew Research shows that poverty in the 35 and under set has exploded higher since the mid-70s when SS taxes were hiked-up. It is about double the rate.

Join us at, one-stop shopping for people interested in Social Security reform.

March 27 2012 at 12:20 AM Report abuse rate up rate down Reply

The only thing that needs to be done with social security is not with the program it's self but rather the politicians that continue to find ways to get into it to pay for things that it was never meant to pay for. Get the thief's out of SS and and that listing ship will eventually right it's self.

March 26 2012 at 2:58 PM Report abuse +1 rate up rate down Reply

If an individual is caught collecting fraudulant disability benifits ... they should be made to repay the system, even if it means selling their home,vehicles, or cashing in any investments. Not only are we getting ripped off by Congress but by each other. SS should be a suppliment to one's retirement ... not ones sole source of retirement income. Far too many people in our Country are on the take. Why must we wait untill an election cycle for a politician to want to "clean up" the system. We as a Nation should be outraged with the levels of fraud and waste by Federal and State Governments. Who are those stealing from us? Who are those responsible to weed out the thives? Why have they waited so long or preformed so ineptly?

March 26 2012 at 2:44 PM Report abuse +2 rate up rate down Reply

The single biggest reason why social security is in fact struggling is that it is a victim of unintended consequences of letting American corporations get away with sending all those jobs overseas. Just like every other local, state and federal agency ... it isn't just a case of "revenues " being flat, they're shrinking. What do you expect after years and years of loosing jobs to foreign countries. 18 to 24 million people paying their fair share into the program. Now they're unemployed ... not contributing to the fund. Do the math ... quite a big chunk of change has completely disappeared, vanished ... and no one in Washington has enough of a pair to check this. There's more than just jobs being lost ... this country's future is disappearing as well. This concept of "business without borders" isn't working ... What's globalization done for ... you ... lately ?

March 26 2012 at 2:26 PM Report abuse +1 rate up rate down Reply

One out of three SS takers are under 60. You shouldn't qualify for SS disability unless you are more disabled than FDR.

March 26 2012 at 1:58 PM Report abuse +2 rate up rate down Reply

Isn't the teflon President named Clinton?

March 26 2012 at 1:56 PM Report abuse +1 rate up rate down Reply
1 reply to z4rock's comment

Clinton was as is Obama a moderately conservative president. We enjoyed unprecedented prosperity under his leadership. His main problem was with his sexual misdeeds. That had nothing to do with his governance and he was ultimately acquitted of the politically driven charges of the Republicans. In subsequent years a number of Republicans and a few Democrats have been guilty of sexual misconduct. The courts and public opinion have dealt with that. I don't understand what you are saying. I think it has no basis in fact, and is based only on your personal bias.

March 26 2012 at 3:03 PM Report abuse -1 rate up rate down Reply

One of a number of tax increases enacted during the Reagan presidency (yes the teflon president did raise taxes} was a huge increase in the payroll tax. This tax was allegedly to save Social Security, but the surplus, after current payments was put into government securities, and the money was not kept in a "lockbox" but was reinjected into the general fund and used by cowardly and possibly criminal congresspeople to mask the truly massive size of Reagan's budget deficits, and then to mask the size of deficits under subsequent administrations, both Republican and Democrat. Low income people pay this tax on all their income. High income people pay tax on only a portion of theirs. The result was that many low income people actually ended up paying more in payroll tax than in federal income tax. It became a defacto regressive income tax. Rich people make the rules and they spin things to their own advantage. I've seen posts here from flag waving people saying the SS trust fund should be confiscated to lower the national debt. These people have no shame.

March 26 2012 at 12:29 PM Report abuse +2 rate up rate down Reply