It’s time to fix Social Security, but how? Brad Swimmer (2024)

BEACHWOOD, Ohio -- As many readers know, it is estimated that the Social Security Trust Fund will run out of funds somewhere around 2035. Social Security won’t stop, but benefits will have to be reduced.

Don’t expect anything to happen this year. With a presidential election looming in a few months, both parties are concentrating on the election.

Why is the trust fund running out of money? In 1950, there were 16 workers for every beneficiary. In 1975, the ratio was 3.2 to 1. In 2022 it was only 2.8 to 1. With baby boomers retiring in large numbers, retirees living longer, and lower birthrates, fewer workers are entering the workforce. Fewer workers per beneficiary mean less available funds.

So, what can be done to maintain benefits? There are a number of options. Before I provide the options, let me explain some background information:

1. Current minimum retirement age is 62. At that age, you get significant benefit reductions from full retirement benefits. Plus, if you keep working, there is an earnings test, and if you earn too much, current benefits will be reduced. In 2024, if you earn more than $22,320, benefits are reduced by $1 for every $2 you earn above that amount.

2. Current full retirement age is 67. At this time, there is no earnings limit, but depending upon your total income, some of your Social Security might be taxable.

3. Current maximum retirement occurs at age 70. For each year you defer benefits past age 67, your benefit is increased by 8% plus the annual cost-of-living adjustment.

The best retirement age is different for everyone and depends upon many factors. That is not being addressed here.

So here are the options that I see:

1. Privatize Social Security. The issue is that Social Security is an annuity. If everyone makes their own investment and withdrawal decisions, what happens to those who run out of money? Do we let them starve?

2. Tax all earned income. In 2024, any individuals with earned income over $168,600 stop paying Social Security tax for the remainder of the year. They do continue to pay Medicare tax. Democrats have long talked about making such a change, and President Joe Biden has spoken about having a gap beginning at $168,600 and taxing again beginning at $400,000. By itself, depending upon which economists you believe, I’ve seen estimates that this extends full benefits for only four to 10 years.

3. Raise the retirement age. The goal of this is to keep people working longer, providing more people contributing and fewer collecting. When my grandparents were 65, their remaining life expectancy was short. But today’s 65-year-old has, on average, a life expectancy in the mid to upper 80′s. That is a long retirement. Many Republicans have suggested raising the age.

4. Reducing benefits. Most retirees are overly dependent upon these benefits. Reducing them will only lead to financial problems for those people.

5. Eliminate the cost-of-living adjustment. This effectively reduces benefits.

What do I suggest? First, I’d eliminate the limit on earned income. This would make Social Security a flat tax. Now, it is a regressive tax. We already have a regressive tax in the form of sales taxes. Second, over a period of time (to be negotiated between the parties), I’d raise the minimum retirement age to 65, and make the full (and max) retirement age be 70.

Combining both will not only extend the full funding for a long time, but give both parties the ability to say that they got what they wanted. And, most importantly, current and future retirees will have a secure Social Security program. Finally, the longer Congress waits, the more severe the changes will need to be. Congress: Are you listening?

Brad Swimmer is a retired business owner. He and his wife Judy owned and ran a printing business in downtown Cleveland from 1991 to 2019. Prior to that, he was a finance manager in corporate America utilizing his master’s of business administration (MBA) in finance.

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