Social Security Solution: Where the US Could Find $20 Trillion To Pay You in Retirement, According to Experts

United States capitol in Washington DC with a Social Security card and money.
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Social Security is getting a lot of press right now, and for good reason. It is quickly becoming one of the most important topics of the decade, as there are many reports indicating that there is simply not enough money to pay retirees for much longer.

A recent report by the Social Security Trustees Board highlights the harsh reality of the current trajectory of Social Security benefits, showing that there will only be enough money available to cover about 77% of retiree benefits by the year 2033.

This would be a massive blow to many retirees, as many rely on Social Security to cover a large portion of their retirement income. Here we’ll review the current state of Social Security and share a few expert opinions on how the U.S. can cover the looming funding deficit so payments can continue into the future.

Current State of Social Security

Social Security is in crisis mode, and the recent Trustees report detailed this predicament. Here’s a quick summary of the findings:

  • Retirement and survivor benefits are expected to be reduced by 2033 to only 77% of the expected payout
  • Medicare hospital care benefits are expected to be reduced by 2031 to only 89% of the expected payout
  • Retirement benefits are expected to be reduced to 71% payout by the year 2097
  • Medicare benefits are expected to be reduced to 81% payout by the year 2047

Social Security also has reserves for both Medicare and Social Security inside their respective trust funds. The retirement benefits trust fund had about $2.7 trillion at the end of 2022, and Medicare had about $400 billion.

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The problem is, the income for each trust fund is exceeded by the annual expenses. The retirement fund is spending $40 billion more than it brings in annually, while the Medicare fund is spending nearly $80 billion more than it brings in.

Currently, over 55 million people are receiving monthly retirement checks from Social Security payments, and 65 million are enrolled in Medicare.

What Happens If Nothing Is Done About Social Security

Both Republican and Democratic leaders are championing the protection of Social Security benefits. Both President Biden and Donald Trump have stated they will protect benefits and not allow any cuts to the program. The problem is — doing nothing isn’t good enough.

As the numbers show, instead of building up the trust fund to pay for future Social Security recipients, the funds are being drained each year. This means that there are more retirement benefits and Medicare costs being paid out than workers are paying into the fund.

This current path will lead to insolvency of the fund and a reduced benefit in the future. Current projections show that retirees will have their Social Security checks cut by 23% in the year 2033, and Medicare benefits will only be able to cover 89% of expenses by the year 2031.

With nearly 40% of Social Security recipients relying on this as their sole source of income, a cut this large could have devastating effects on retirees. But this is the promised reality of Social Security if nothing is done to increase plan funding, or adjust how funds are distributed.

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Actual Solutions That Could Help Social Security Remain Solvent

Ilene Slatko, former stockbroker and retirement expert at DSS Financial, mentioned that one of the best solutions right now is to eliminate the wage cap on Social Security taxes. “According to Social Security, approximately 6% of American workers earn over the wage cap, but those workers’ earnings account for almost 40% of total wages reported in this country,” said Slatko. “Because we need to shore up the [Social Security] trust fund, it would make economic sense to eliminate the wage cap.”

She also is in favor of tax incentives for those who pay more into Social Security, or those who don’t apply for benefits at all. “For this 6% [of high earners], there needs to be a tax credit for some amount of the money paid into [Social Security],” Slatko added. “Likewise, we need to offer a tax incentive for those Americans who don’t want to take Social Security.”

André Disselkamp, co-founder of insurance website Insurancy, believes an increase in taxes may be necessary. “Currently, the payroll tax rate for Social Security is 12.4% (split evenly between employers and employees),” he said. “A gradual increase in this rate could generate substantial revenue over time. However, the specifics of this strategy would need to be carefully calculated to ensure a fair distribution among different income brackets and to avoid undue strain on businesses and individuals.”

Tim Schmidt, founder of IRA Investing, said a more involved solution could help. “The establishment of a National Retirement Fund (NRF) could be a novel idea,” he said. “The NRF would be a voluntary, government-backed investment fund to which people could contribute throughout their working lives. Contributions would be tax-deductible, similar to a 401(k) or Individual Retirement Account (IRA), motivating participation. The funds would be invested in a diverse portfolio managed by financial professionals with the goal of long-term growth.”

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Schmidt added, “As the NRF expands, it will earn significant profits, supplementing Social Security reserves. Individuals might receive regular pension-like payments from the NRF upon retirement, or they could convert a portion of their balance into an annuity to complement their Social Security income.”

Will Social Security Be Around When You Retire?

The Social Security Administration believes that without a change, retirees will only see 77% of their promised benefits by the year 2033. Meanwhile, politicians seem to want to avoid promising any drastic changes to the program, especially in the wake of an upcoming election year.

So, it’s really tough to say whether or not the funds will be there in a decade. If nothing is done, on the current trajectory, the SSA will be cutting benefits, which will have a significant impact on retirees. 

While there will still be some benefits in place, it may be better to expect less and eventually get more in the future. This means saving more for retirement and not expecting much in the way of Social Security payments or Medicare coverage.

However, if lawmakers can come together to make some of these suggested proposals to fully fund Social Security, many of the painful realities go away.

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