In the year 2034, there will be a total solar eclipse, the 27th Winter Olympics will be held and the European Space Agency is scheduled to launch an antenna to detect and measure gravitational waves.
It’s also the year that the government’s trust fund that provides Social Security payments is expected to run dry.
The social program’s trustees also reported last week that Medicare will run out of money long before then, possibly as soon as 2026, which is three years earlier than previously forecast.
When that time comes, those who benefit from these services, regardless of age or needs, will face an immediate cut in what they receive. That means someone who reaches the retirement age around 2034 could lose around $110,000 in lifetime benefits.
It gets worse the younger you are. According to an online interactive tool provided by the Committee for a Responsible Federal Budget, I will be 41 years old when Social Security becomes insolvent. Under current law, I will stand to see 24 percent of my benefits slashed when I start receiving them. That means if I earn typical wages throughout the rest of my career and live to the average life expectancy age, I will lose $170,914 in lifetime benefits that were guaranteed to me by law more than 60 years before I was born.
This is not a new problem. The 2034 expected deadline remained unchanged from last year’s government report. But what makes this year different is that both Social Security and Medicare needs are projected to exceed the amount of annual income that funds them. This means they will be forced to start tapping their reserves in 2018 ― something that hasn’t happened since the early 1980s ― and a threshold we didn’t expect to cross again for several more years.
A large aging population that is living longer and an ever-increasing cost of living could potentially make that 2034 date come sooner and would definitely make its aftermath more financially painful.
It’s not often in a democracy that we get such advance notice of a monumental crisis. So it’s time for Congress to take action on a problem they have been all but ignoring for far too long, especially when it involves such a crucial bedrock for the American middle class.
If lawmakers foolishly wait to address this issue, they would be forced to resort to either higher taxes or larger benefit cuts. In addition, the country’s enormous debt — currently $21 trillion — will only continue to balloon, which makes kicking the can down the road even less desirable.
The government’s most immediate strategy is to hope that the growing economy, Republican tax plan and deregulatory actions will fill the holes by themselves in the years to come. While our post-recession rebound at its current trajectory will undoubtedly help some, the current tax plan that the government is banking on to save Social Security is projected to add even more to our debt.
There are several unpopular options, such as increasing the retirement age for collecting Social Security benefits, increasing the limit on annual income that is taxed for Social Security and raising the taxes that both employees and employers must pay toward Social Security and Medicare. It’s time Congress start having conversations about them.
Sadly, the American people have little faith in their representatives to take action ― especially the young people, who can expect to pay more in the short run and have more to lose in the end.
A 2015 Gallup poll found that more than six out of 10 people from ages 18 to 49 did not believe they would receive checks from Social Security when they retired. And they have little interest in spending their working years investing a large sum of their paychecks into a system that they won’t be able to fully benefit from when the time comes.
Congressional leaders know very well their constituents will feel the same way. Hopefully, that will create some motivation to act now, rather than later.