Q: Should Americans count on Social Security benefits being available in the future?
That really is a two-pronged question. Will Social Security exist at all? And if so, will it be sufficient to support Americans who are retired or become disabled?
In order to know what the future holds, it may help to look back on the history of the Social Security retirement benefits system as well as Social Security Disability Insurance (“SSDI”) and Supplemental Security Income (“SSI”) programs. While Social Security retirement benefits are paid to workers upon their retirement, the latter two federal government programs pay work-based or need-based benefits to people with different qualifying disabilities as further detailed here.
In today's political climate, people are very concerned about what changes will be enacted under a new president and how those changes may impact their personal lives. Will new laws or changes in existing programs benefit or hurt them? This uneasiness and transition, not surprisingly concerns Americans who rely-- or plan to rely-- on the Social Security administration benefits programs.
For years there've been rumors that the Social Security retirement benefits fund will be exhausted not available to pay Americans who have worked in invested in the program for decades. Millions have planned for their retirement based on the availability of those funds and have relied on the annual statements that project the amount they can expect to collect in their golden years.
The trust fund for Social Security benefits is projected to be exhausted by 2034 if changes are not made to the program. One of the main reasons for the crisis is the large number of baby boomers who have already begun retiring and collecting benefits at a rate faster than the number of young replacement workers entering the workforce in rough economic times can keep pace, skewing the “worker: retiree” ratio that has successfully funded the program to date.
Perhaps the answer to the future of the program lies in the history of the program.
In the “old days”, economic security in old-age or hard times fell upon the extended family who took care of elders or the disabled who were not able to contribute. The Industrial Revolution saw people move from rural to urban settings and the extended family gave way to the nuclear family. 1920 was the first year that more U.S. people lived in cities than on farms. Between 1900 and 1930 the average life expectancy increased higher than ever recorded in human history as a result of better health care, sanitation, and the early public health programs. That, coupled with the devastation of the Great Depression created a "perfect storm" that highlighted the need for pension and welfare systems.
Several flawed state-led “old age” pension programs ultimately lead to the enactment of the Social Security Act in 1935 to create a "a work-related, contributory system in which workers would provide for their own future economic security through taxes paid while employed.” It was a good system, but change was needed to adapt to changing times.
In the decades since its enactment, there have been a handful of amendments needed to fine-tune the Social Security system and to keep it financially solvent. Some past amendments involved adding dependent benefits, cost-of-living adjustments, changing the ages for eligibility, and setting minimum retirement benefits.
Further, in the face of looming short-term and long-term financing crises, the 1977 Amendments were made to address a projected exhaustion of trust funds by 1979. Sound familiar? The 1977 Amendments raised the payroll tax slightly and reduced benefits slightly in order to keep the trust fund solvent for an anticipated 75 more years. As previously reported on this blog, another payroll tax increase of approximately 7.5% could be one answer for extending the fund’s solvency from 2034 through the year 2090.
Social Security disability benefits were enacted in 1956 for disabled workers between 50 and 64 years old and disabled adult children. In1960, amendments broadened the benefits to disabled workers of any age and their dependents.
The Supplemental Security Income benefits program was established in 1972 to federalize previously state-run programs for the "needy, aged, and blind" and converted 3 million people from the state welfare program to a federalized SSI program run by the SSA.
One in 7 people receive a Social Security benefit of some kind and greater than 90% of workers are in jobs that are covered by Social Security. It's no wonder that people are worried about the security of Social Security.
Obviously, the safest way to look at Social Security retirement income is as a bonus rather than a sure thing. Of course, the younger you are the more palatable that idea might be with many years ahead to plan for your retirement through other means. Hopefully, the government will look forward while looking at the past and make any necessary adjustments to maintain the fiscal solvency of all social security programs.
If you have any questions about Social Security benefits, the Social Security disability Law Firm of Peña & Bromberg PLC can assist you. Call us at 559-644-0031 for a free consultation. We assist Social Security disability and veterans disability clients nationwide and serve local clients throughout Central Valley California.