Recently, my accountant suggested I start taking Social Security benefits.
I’m 67, and if I make it to 79 — the average lifespan for an American male — Social Security will pay me about $500,000.
Fortunately, I don’t need the money. With our government drowning in debt, I don’t understand the logic in Uncle Sam sending me a monthly check for the rest of my life.
In 1935, upon signing the Social Security Act, former president Franklin Roosevelt said its intent was to “give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.”
Mission accomplished. Social Security was a crowning achievement and remains so today, providing an essential lifeline for tens of millions of Americans. But by giving benefits to everyone — even though they are earned through a lifetime of work—it is also supporting more than a few fortunate recipients in recreational pursuits, and I didn’t see anything in FDR’s speech about covering greens fees. (And no amount of federal funding will improve my golf game anyway.)
It got me thinking that there must be a better use for the money coming my way. And I believe there is.
I wish I had faith that the government would spend my money responsibly. If so, I’d consider just returning it to the U.S. Treasury. But I don’t. So for the rest of my life, I’ll be donating every dollar I get from Social Security to charitable organizations with the power to move our national agenda forward.
I hope others with the same financial security and ability will join me, as it can make a big difference for charities across the country who are faced with meeting greater demands with fewer resources.
But I have no illusions that this gesture — even if made by many others — constitutes in any way a sustainable fix for Social Security’s finances.
In 2010, the last year for which data was available, Social Security paid $1.4 billion to 47,500 millionaires. In that same year, it paid out 500 times more benefits to everyone else for a total of $715 billion (it paid out over $900 billion in 2016).
When Washington finally tackles Social Security’s financing problem — which it last did in 1983 — cutting or eliminating benefits for people like me must be part of the solution. And the longer Congress waits, the deeper the cuts. However, we need to understand that no number of financially secure people sacrificing Social Security benefits alone will make a real dent in the program’s growing funding gap.
A few weeks ago, Americans learned just how big that funding gap is when the Social Security Trustees released their annual report on the program’s finances.
The prognosis is not good.
Social Security’s unfunded liability over the next 75 years — the difference between the projected benefits it will pay out and the tax revenue it will take in — is now $12.5 trillion, or the equivalent of 61% of U.S. government’s current national debt.
In 2034 — just 17 years from now — the Social Security Trust Fund will no longer be able to pay full promised benefits, requiring either an immediate benefit reduction of 23% or an increase in the payroll tax from 12.4% to over 16%.
This runaway Social Security financing train is being fueled by two demographic trends that will only accelerate in the years ahead.
First, Americans are living — and therefore collecting benefits — much longer. Since Ida May Fuller became the first American to receive a Social Security check in 1940, the average life expectancy of a Social Security recipient has increased by about 18 years.
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The second closely related trend is the diminishing share of workers available to finance the retirement benefits of the massive Baby Boom generation, 10,000 of whom are retiring every day.
In 1950, there were 16.5 workers paying into Social Security for every one person drawing benefits. By 2035, there will only be 2.1 workers for every recipient.
Social Security’s funding challenge is worsening just as the program is becoming increasingly important to Americans’ retirement security. In 2014, 61% of elderly Social Security beneficiaries receive at least half of their income from the program; and 41% of Americans approaching retirement have no private savings in a 401(k) or an IRA.
Leaders in Washington understand this math and the choices available to stabilize Social Security.
We can raise the share of income subject to the tax (which is $127,200 this year), raise the payroll tax rate, change the retirement age, cut benefits or some combination of the above.
Additionally, we can also expand our economy by increasing the production, innovation and employment base in the United States. However, this would require an entirely different approach to education and immigration to create more workers with the proper skills who will support future retirees.
Many of these steps would not be easy to take. Some might require members of Congress to make difficult choices, which explains why the alarming Social Security Trustee report received little attention in Washington.
But the problem isn’t going away and Americans know it. The time is now to do something about it.