Social Security is not something many millennials think about unless one looks at the money missing from paychecks. 66, the new retirement age, is so far away for most of us that it’s easy to ignore. The argument is that by the time we get old enough to retire, the Social Security program and its funds will be depleted. Is this a doomsday theory from policy pushing financial advisers, or is there truth in the fact that we’ll receive nothing from a program we’ve paid into for our entire lives?
Currently Americans pay 6.2% of all their earnings to the combined Social Security Retirement and Disability Insurance (DI) Fund. These two funds both fall under Social Security (SSI), but have their own respected budgets. DI is in crisis right now, and according to a 2015 report from the Social Security Administration, it will become depleted by the end of 2016, unless there is government intervention. Don’t worry though, we aren’t totally leaving our disabled out in the cold. An easy way to re-fund DI is to allocate a larger portion of payroll taxes to Social Security, which has been done 11 times in the past. Ultimately, the decision will rest on the shoulders of our politicians, but for 3 in 10 millennials who will collect DI before they hit the age of 65, the repercussions are a reality. For disabled Americans who rely on Social Security Disability benefits, the possibility of losing them is a scary one that we have to face now.
If we look at Social Security for retirement, the landscape also looks bleak. According to The Summary of the 2015 Annual Report, interest and trust-fund assets can float the program ‘til 2034. Starting in 2019, expenditure for the program will exceed tax revenues. Basically what this means is that SSI will be taking in less in taxes than it’s paying out in benefits, so we will need to rely more on the interest of the funds that are currently accumulated. If policy doesn’t change at all, we will not be collecting Social Security at retirement age.
So they were right, and we are all screwed, right?
Not likely. Social Security has been around for a long time, and it’s very unlikely that the government would allow it to be destroyed or dissolved. Beyond ensuring that our elderly have some cushion when they retire, it supports nearly 9 million disabled Americans and nearly 2 million children of disabled workers.
What are the solutions?
Social Security will be more viable if we tax the rich, and remove the income cap on taxes that go to SSI. Right now the max for Social Security on taxable earnings is $118,500. By making that a non-existent cap, we will reduce projected shortfall by 4/5ths and tax millionaires and billionaires at the same rate as everyone else. If you make one million dollars a year, you are effectively contributing .07% of your income while the rest of the country contributes 6.2%–this obviously needs to change.
A more likely situation is to see a larger portion of our income be taken out for Social Security over a gradual and sliding scale. Higher taxes puts more of the responsibility on Millennials, and less on the corporations and investment bankers that have money to spare. Clearly, like many structures and institutions, we are feeling the repercussions from a problem created by our parents. As a millennial and a voter, you should care about Social Security and what it won’t do for you if income disparity and inequality continues to exist in our country.
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