(TNND) — Half of Americans who have not yet retired expect to rely on Social Security benefits, but more than 70% of them are concerned that they will not receive the retirement benefits they were promised. Masu. New bank rate survey showed.
More than three-quarters of today's retirees rely on Social Security to pay for essential expenses, according to a Bankrate survey.
A scary deadline is looming for many Americans: The Social Security Trust Fund It is predicted that it will run out in 2033..
But the trust fund That's not what many Americans thinksaid one expert.
And misunderstandings about the nature of Social Security are a big reason why the program's solvency remains an issue, the Cato Institute said. Romina Boccia Said.
“Perhaps the best way to explain what the Social Security Trust Fund is is to explain what it is not,” Boccia said. “And it’s a trust fund.”
Boccia, director of budget and entitlement policy for a libertarian-leaning think tank, said the Social Security Trust Fund is more of a political construct than a true savings bank.
Social Security's main source of revenue is payroll taxes on working Americans, which support retirees.
Until 2010, workers paid more in Social Security taxes than the federal government paid out in benefits, she said.
Since then, Social Security has borrowed more than $1 trillion to fill that gap.
And the government is expected to borrow an additional $4 trillion between now and 2033 to cover the Social Security deficit.
The Social Security Administration's legal borrowing authority is scheduled to expire in 2033. That's what people think will deplete the trust fund.
That doesn't mean retirees will run out of money in 2034. However, this means that retirees can only receive a paycheck based on their current incoming income, primarily payroll taxes. This is approximately 20% of the world. -Benefits of board cut-in.
Congress is likely to take action by then, but solving the problem will not be easy.
“The deficit is accelerating,” Boccia said.
Boccia said that when Social Security collected more money than it needed to pay out benefits, as it did before 2010, the government used the surplus elsewhere.
Currently, the trust fund is essentially a “loan-only piggy bank” issued by the Treasury Department to the Social Security Administration so that retirees can receive benefits.
“Probably technically speaking, this is an accounting ledger within the government,” Boccia said.
Mr Boccia said the government had been changing deck chairs for the past 14 years to maintain social security benefit levels.
“And some of those deck chairs fell overboard,” she said.
Boccia said demographic changes are a big problem for Social Security.
People are living longer, she says, but aren't adjusting their retirement ages accordingly.
birth rate has decreasedwhich means there are fewer new workers to generate tax revenue for retiree benefits.
In the 1950s, 16 workers paid taxes for every Social Security recipient, Boccia said. Currently, only 2.7 workers pay taxes to cover the cost of supporting Social Security recipients.
Boccia said the benefits have also become higher in real terms, exceeding inflation.
This is a Social Security benefit formula that provides new recipients with a one-time productivity boost based on the rate of wage growth in the economy, he said.
Boccia said the simplest and most politically feasible solution to fixing Social Security is to slow the growth of generous benefits in the future.
He said early profits should be indexed to prices rather than wages. And that change alone would eliminate about 80% of the current funding gap.
He said the reform he would like would be a “more bottom-up approach” that would introduce some kind of universal flat-rate benefit.
She said the change would better distribute benefits to those most in need of financial support in retirement by moving from income-based benefits to years of service-based benefits. .
For example, a flat rate can be 125% above the federal poverty level.
This would respect the original purpose of Social Security, which is to protect the elderly from poverty in retirement.
“The benefit of these more fundamental changes is that it gives people confidence about the size of the benefits they can expect in retirement, which encourages people to use their own savings and resources to supplement basic benefits. “It will be much easier to plan investments that we will receive from the government,'' Boccia said.
Does the government need to raise taxes to preserve Social Security for future generations?
Boccia said the tax increase is not absolutely necessary.
“But the question is, is it politically viable to reform Social Security without raising taxes on some Americans?”
Social security reform is a difficult challenge for politicians to tackle.
No one wants to pay high taxes. And no one wants their retirement benefits cut.
Boccia said a finance committee set up in Congress could be given the power to reform social security.
“Then, by leaving the details to committee, Congress can provide political cover for unpopular changes,” she said.
Boccia said Americans should be more worried about the growing national debt than about Social Security benefits disappearing in 10 years.
“This program has been around for 90 years,” she said. “And the most likely scenario without meaningful reform is that Congress decides to borrow more money, essentially ignoring the 2033 borrowing authority limit, and every time the debt limit comes into question, Just break through it, like break through a limit.”
