Social Security: $39 Billion Deficit in 2014, Insolvent by 2035
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As Social Security has shifted from a program to protect the elderly from poverty to a potential decades-long income subsidy, current workers and younger generations will inevitably bear the burden of Social Security’s drain on the federal budget.
The sooner lawmakers address Social Security’s massive and growing cash-flow deficits, the lower the burden will be on current and future workers. Four important reforms could help resolve Social Security’s financial shortfall:
– Fix Social Security’s cost-of-living adjustment. Social Security’s cost-of-living adjustment (COLA) is based on an outdated measure of changes in the cost of living that fails to account for how people react to changes in prices.
– Raise the early and full retirement ages. Lawmakers should gradually and predictably increase the early and full retirement ages to 65 and 70, and then index both to increases in life expectancy.
– Focus Social Security benefits on those who need them most. Lawmakers should phase out benefits for retirees with high levels of non-Social Security income and provide a true system of social insurance that focuses on seniors who need it most.
– Implement a flat benefit structure. Congress should put Social Security benefits on a schedule to gradually arrive at a flat payment structure for those who work more than 35 years. This flat benefit payment should be sufficient to keep eligible seniors out of poverty throughout their retirement.
Absent reform, Social Security benefits will be cut across the board by 23 percent in 2035. Action should be taken this year to protect Social Security’s most vulnerable beneficiaries from such drastic cuts. Lawmakers should immediately focus Social Security benefits on those who need them most, and enable more Americans to save for the future in private retirement accounts.
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