Each and every month, Social Security demonstrates its importance to this country by divvying out checks to more than 62 million qualified beneficiaries, nearly 43 million of which are retired workers. Out of these close to 43 million retirees, some 62% are reliant on their Social Security check to provide at least half of their income. Without this guaranteed monthly benefit, we'd probably staring down a serious elderly poverty problem right about now.

Social Security is careening toward disaster

But for as much of a lifesaver as Social Security has been, this crucial program is also in some deep trouble, at least according to projections from the Social Security Board of Trustees.

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The 2017 report, released last summer, estimates that a major change is set to take hold in 2022. After four decades of generating more in revenue each year than Social Security pays out in benefits, the reverse will happen in 2022, and the cash outflow from the program will accelerate with each passing year thereafter. By 2034, the roughly $3 trillion that will have been saved up over the span of four decades will be completely exhausted.

While this whole scenario probably sounds terrifying, it doesn't mean Social Security is on the brink of nonexistence. Social Security, which is funded three different ways, is protected against bankruptcy by its largest funding mechanism, the 12.4% payroll tax on wage income between $0.01 and $128,400 as of 2018. As long as Congress doesn't adjust Social Security's sources of funding, and Americans keep working and earning income, the payroll tax ensures that revenue will be collected that can be disbursed to eligible beneficiaries.

However, there's a big difference between the program surviving and Social Security being sustainable at its current payout schedule. What the expected depletion of Social Security's asset reserves tells us is that the payout schedule isn't sustainable right now, and that by 2034, an across-the-board cut to benefits of up to 23% may be needed in order to sustain payouts through the year 2091, without the need for any additional cuts.

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Social Security's grim reality: Someone's going to lose

With so many seniors reliant on Social Security for at least half of their monthly income, and 34% leaning on the program for essentially all of their income (90% to 100%), any sort of sizable reduction in benefits would be very concerning. Clearly, Congress needs to step in and propose a fix for Social Security that would add revenue, reduce long-term expenditures, or accomplish some varied combination of the two.

But there's a grim reality to fixing Social Security that a lot of folks have glazed over. Namely, that someone's going to lose out. No matter what is (or isn't) done to fix Social Security, not everyone will come out as a winner on the other side.

For example, Democrats have primarily favored the idea of raising or eliminating the maximum taxable earnings cap associated with the aforementioned 12.4% payroll tax. Rather than this tax ceasing at $128,400, and thusly allowing well-to-do workers the ability to escape being taxed on a portion of their income, Democrats would prefer to eliminate or raise this cap to require the rich to pay more. In doing so, the estimated $12.5 trillion cash shortfall between 2034 and 2091 would be eliminated, and benefits for current or future retirees wouldn't need to be cut. But those wealthy folks who would be required to pay more into the system wouldn't see one extra cent in benefits when it comes time to collect their Social Security check. That's because Social Security caps monthly maximum benefits ($2,788 in 2018) at full retirement age.

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As for Republicans, they'd prefer to gradually raise the full retirement age -- the age at which you become eligible for 100% of your retirement benefit, as determined by your birth year -- from a peak of 67, which will be hit in 2022, to somewhere between ages 68 and 70. Raising the retirement age would account for increased longevity and lead to long-term expenditure reductions. Either workers would wait longer to receive their full retirement benefit, or they'd claim earlier and accept a steeper permanent reduction to their payout. This, too, would completely resolve Social Security's cash shortfall through 2091, as well as protect current retirees, but it would reduce benefits for all future claimants whose full retirement age would increase.

Every Social Security solution has a loser. That's a fact. But something needs to be done by Congress within the next 16 years, otherwise it's a practical guarantee that everyone -- current and future retirees -- will lose.

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