It is certainly no secret that the Social Security Disability Insurance (SSDI) trust fund is in trouble. Projections estimate the trust fund is so depleted that benefit cuts by about 20 percent would need to be made by as early as next year to save the program. There has been and will continue to be a lot more talk about ways to solve this problem, but most experts believe Congress will eventually use a band-aid type of temporary solution to the problem by transferring funds between the agency’s retirement and disability trust funds. What a lot of people are not saying is that there are easy solutions to the funding issue of SSDI and for Social Security retirement, which faces its own funding issues. The problem is no one wants to use these solutions because they would not be popular with the public and there is always another election right around the corner.
- Increase the Social Security tax: Increasing taxes is never popular, but it would improve the sustainability of both the retirement and disability programs. If you ask the American public would they rather have their Social Security benefits slashed when they are already on fixed incomes as retirees or disability recipients, or pay higher taxes to maintain Social Security in the future, what do you think they will choose? There is also the option of opening Social Security taxes to income above $118,500 a year. Currently high earners do to not pay Social Security taxes on anything above $118,500 per year.
- Cut Social Security benefits: In theory, this is a solution, but not a realistic one. Politicians who suggest cutting Social Security benefits now or in the future probably don’t have long careers ahead of them. If SSDI benefits decrease by 20 percent in 2016 and retirement benefits decreased by 25 percent when the retirement trust fund is depleted there may be a march on WashingtonD.C., complete with pitchforks.
- Increase Retirement Age: One way to extend the life of the Social Security retirement program is to increase the retirement age, something the government did back in the 1980s. Depending on the year a person was born, the retirement age began extending from 65 to 67. Everyone born in 1960 and later has a retirement age of 67. Life expectancy in 1983 when the deal was hatched was 74.5 years old. Life expectancy in 2014 was 78.7 years, more than for years longer than 1983. Increasing the retirement age to 70 would not seem like that hard of a sell to sustain a program Americans have said they cannot live without.
- Do Nothing: It is likely this is the approach lawmakers will take in the short term because they seem to only act when an impending crisis is before us and they have no other choice. In reality though, doing nothing is not an option forever. It is a real thing that the SSDI trust fund will be depleted by sometime in 2016 and the retirement trust fund, although in better shape, has less than 20 years before it will be depleted. It is likely that Congress will eventually approve the short-term fix of transferring funds between the retirement trust fund and the disability trust fund to extend the SSDI program, but only time will tell. And, for realistic long-term solutions are eventually needed.
