Social Security provides monthly income to 71 million Americans but a poll last November, of people under age 60, found 70% believe the retirement program is going bust.
“Social Security is not going bankrupt,” said Mary Beth Franklin a certified financial planner and contributing editor at Investment News. “There are long-term financing problems that we can deal with,” she told a Bipartisan Policy Center (BPC) webinar called Social Security: Myths vs. Facts.
Working Americans pay 6.2% of their income, up to $142,800, to fund Social Security. Their employers match it. For the last 40 years, the program has intentionally collected more than it needed depositing the excess in trust funds to help fund the retirement of millions of Baby Boomers.
“Over the next few years, those trust funds are expected to run dry, that excess reserve, around 2034” Franklin said. “At that point, there would still be enough of ongoing payroll taxes to pay about 75%, 80% of promised benefits.”
The Social Security Administration (SSA) said changing demographics are part of the problem. “In 1940, the life expectancy of a 65-year-old was almost 14 years; today it is just over 20 years. By 2035, the number of Americans 65 and older will increase from approximately 56 million today to over 78 million.”
And, as the U.S. population ages the number of working Americans supporting retired Americans will decrease. “There are currently 2.8 workers for each Social Security beneficiary. By 2035, there will be 2.3 covered workers for each beneficiary,” according to the SSA.
Jason Fichtner, the Chief Economist at the BPC and a former Social Security deputy commissioner said, “No one wants to live with a 20% or 25% haircut in their Social Security benefits.”