If you want to be the life of your next cocktail party, just tell everyone you meet that in 19 short years, all scheduled Social Security benefits are expected to be slashed by about 23%. Yep, 2033 will be a heck of a year!
Oh, sure, you might say. Congress could actually do its job and work diligently in a bipartisan effort to fix things. But what are the odds of that?
What's the problem?
Confidence in Congress is at historic lows, and deservedly so. However, I have to think public pressure will become so intense that lawmakers will be forced to find a way to resolve the Social Security crisis.
That's the good news. The bad news is that any solution will cause all of us some pain somewhere along the line. Here's the short summary of the government-appointed Board of Trustees' 250-page report just released a few weeks ago:
- With no congressional action, Social Security and Medicare trust fund reserves will run out in 2033.
- At that time, there will only be enough funding coming in to pay 77% of scheduled benefits.
What's the fix?
According to the report, here's what it would take to fix the problem and keep the combined trust funds solvent for at least the next 75 years:
- Have everyone pay 22.8% more in payroll taxes by increasing the rate from 12.4% to 15.23%;
- Reduce benefits to all current and future beneficiaries by 17.4% (or 20.8% if reducing only the benefits of those first becoming eligible in 2014 or later); or
- Some combination of the above
I had the pleasure of interviewing Jean Setzfand, the vice president of financial security at AARP, about all of these issues. In the video below, she explains that perhaps the Social Security crisis will jolt people into taking some action to help themselves. Let this serve as a catalyst for you to either begin saving or start saving more.