Greg Roberts

Greg Roberts

The oversight of the Social Security and Medicare program is the responsibility of the Trustees of the system. The Board of Trustees currently consists of six members, four of whom automatically serve by virtue of their positions in the Federal Government. These four are the: Secretary of the Treasury (the Managing Trustee), Secretary of Labor, Secretary of Health and Human Services, and Commissioner of Social Security.

The board also consists of two other public members that are appointed by the president and confirmed by the senate. At present, those two slots are vacant.

One the most important duties of the board is to report annually to the president and the congress regarding the financial status of the Social Security system. In preparation of that report, the actuaries at Social Security are continually monitoring the solvency and sustainability of the OASDI system. (Old-Age, Survivors and Disability Insurance Program).

This year’s annual report was issued in late April. Here are the most important takeaways for me in the report:

• Social Security will run out of money by the year 2035 and, unless changes are made, the system could not then guarantee full benefits for current retirees. What this means in practical terms is that the benefits that could legally be paid out in the event of insolvency would be limited to those supported by then current tax revenues. For most of us, this would be mean of benefit reduction of upwards of 20%.

• In order to prevent insolvency, benefits would need to be reduced or the start date deferred. Or both. Additionally, contributions to the program could be increased. Finally, increases in Social Security benefits could be ameliorated by using a cost of living factor, known as “Chained Consumer Price Index” in place of the current system: CPI. Other changes are possible as well.

• The system will spend more on benefit in 2019 than it generates in revenue (it did the same in 2018). Without congressional action, the imbalances will continue to worsen, culminating in insolvency in 2035.

• Thankfully, there is still time to take the necessary steps to fix the system, but our legislators must act now. The sooner changes are made, the less severe they will need to be. For example, restoring solvency today would require the equivalent of a 22% increase in payroll taxes, a 17% reduction in all benefits, a 20% cut to new benefits, or some combination.

• Waiting until 2035 would increase the needed adjustments to overall taxes and benefits by over a third and would make it impossible to save Social Security with changes for new beneficiaries alone. Acting now would also allow policymakers to phase in changes gradually.

• I was able to "fix" the financial shortfall in the OASDI system by visiting www.crfb.org/socialsecurityreformer/. While at this site, I was able to plug in my fixes to the system to achieve solvency and you can as well.

For your “what it is worth department,” the changes that I made to eliminate the shortfall and achieve solvency in the system were:

1. I subjected all wages to payroll taxes;

2. I slowed the benefit growth for the top 20% of all earners:

3. I raised the NRA to 69 over time and then tied future increases to actual longevity;

4. I substituted the Chained CPI approach.

5. I invested the trust fund in equities.

See what you come up with.

Greg Roberts is a certified financial planner with 35 years of financial and estate planning experience. Do you have a financial planning question for Greg? Email him at greg@lifesolutionsonline.net.