So my first question after reading the following is.......is it "fair" to expect someone who has squandered all of their money and is only able to use social security in retirement to be forced to work until the age of 73, or later....? Or should those of us who worked hard and saved be forced to subsidize an early retirement for them? Think carefully about your answer, why try to accumulate wealth if it is simply going to be taken away from you and given to the less responsible?
By Dan Weil
The Social Security system will pay out more in benefits than it gathers in tax receipts this year for the first time since 1983, according to a new report from the Social Security Board of Trustees.
The deficit is estimated at $41 billion.
The program will remain in the red through next year, go back into the black for 2012-14, and then return to deficit territory every year until the Social Security trust fund is exhausted in 2037, the report estimates.
While experts have been foretelling the downfall of Social Security for years, the Great Recession that began in December 2007 hastened the process.
The recession has put millions of people out of work, thus cutting the revenue from Social Security payroll taxes.
Workers pay a 6.2 percent payroll tax on their wages below $106,800, and then that total is matched by employers.
“The impact of the current economic downturn continues to be felt by the Social Security Trust Funds,” Michael Astrue, commissioner of Social Security, said in a statement accompanying the report.
“The fact that the costs for the program will likely exceed tax revenue this year is not a cause for panic, but it does send a strong message that it’s time for us to make the tough choices that we know we need to make.”
Treasury Secretary Timothy Geithner said, “We must continue to make progress addressing the financing challenges," referring to both Medicare and Social Security.
The retirement of 78 million baby boomers will keep pressure on Social Security, as these people will stop paying into the system and start taking money out.
After 2015, the government will have to dip into its Social Security trust fund to dole out the difference between benefits owed and taxes paid, the report says.
The trust fund consists of bonds backed by the government’s “full faith and credit” but not by any assets. Already some of the bonds have been used for other areas of government in past years, leaving the trust fund at $2.5 trillion.
To actually redeem the trust fund bonds for cash, the government will have to borrow money through the bond market, just as it does when issuing Treasury securities.
Doing so will deplete the entire trust fund by 2037, the trustees say. To be sure, at that point enough money will still be coming in from Social Security payroll taxes to fund 78 percent of retirement benefits, the report says.
More than 53 million people receive Social Security, and retirement benefits average $1,100 a month.
President Barack Obama has created a bipartisan commission to come up with recommendations on government finances, including Social Security.
Experts have proposed a wide range of remedies, from increasing the retirement age, to giving less Social Security benefits to the wealthy, to imposing payroll taxes on wages above the current $106,800 limit.
Those who favor an increase in the retirement age from 66 say it is justified by our lengthening life spans.
"The full retirement age would have to increase to 73 for adults to have the same expected years of remaining life in retirement today as in 1940," Urban Institute senior research associate Melissa Favreault and senior fellow Richard Johnson wrote in a recent report.