This post excerpted from Restoring America’s Middle Class Starts with Keeping Social Security’s Promise || Part 1 | 2 | 3 | 4
Much ado is made over the projection that in addition to the payroll tax, Social Security will begin spending Trust Fund interest later this decade, drawing on the principal of the Trust Fund in the mid-2020s, and in the late 2030s will have spent down the Trust Fund leaving the program to rely on payroll taxes alone. At that point, payroll taxes will cover 78% of benefits promised under the current formula.
Never mentioned by most who profess to be concerned about Social Security’s future is the fact that full benefits in 2040 are projected to provide the typical retiree with $8,000 more in income after inflation than today’s middle-income senior receives. Therefore, 78% of promised benefits in 2040 would still provide retirees over $2,000 more in buying power.
Productivity growth means that over time, employees produce more with each hour of work. Both earnings and living standards gradually rise as a result. By 2040, the typical American worker will be earning 55% more than in 2010, after adjusting for inflation. That is why promised benefits will also be considerably higher – and each worker will be able to support more retirees.
Moreover, under just slightly different assumptions, Social Security is projected to have resources sufficient to cover full benefits through the end of this century.
Rather than debating cuts to Social Security, we should focus on ways to increase benefits, especially for women and people who have low earnings throughout their careers. Even with Social Security, far too many people struggle to make ends meet. About 23% of all households over age 65 and nearly 30% of those over 80 have incomes below 150% of the federal poverty level.
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