PLANADVISER -May/June 2022 - 8

trends
Social Security on the Brink?
Long-standing solvency problems remain
" Fundamentally, you have
to either raise taxes or cut
benefits, and no politicians
want to do either of those
things. "
The 2021 trustees
report shows that to keep
the trust funds solvent
would require increasing
payroll taxes by 3.36% and
reducing benefits by 21%,
and that to defer action
would
necessitate
even
more drastic changes. Even
so, Alice Munnell, director
of the Center for Retirement
Research at Boston College,
says she believes it could be
years before Congress acts
on Social Security.
A Solution Before 2034
Even if there is no action
this year, Nancy Altman,
president of Social Security
Works, says she expects
EACH YEAR, the trustees of the Social Security and Medicare
trust funds report on the current and projected financial
status of the two programs. The annual reports include
extensive information about the current operations of these
important social insurance programs and careful analysis of
their outlook.
The trustees did not publish last year's report until
August 31. In it, they projected that the combined asset
reserves of Social Security's Old-Age and Survivors Insurance
and Disability Insurance trust funds would be depleted
in 2034, with 78% of benefits payable at that time.
Current death rates notwithstanding, American life spans
continue to stretch, meaning the Social Security funds in the
reserves will need to support more people, longer. A February
report from the American Society of Actuaries projected that
life expectancy could go up another four years by 2090.
Will Congress Act?
While the projected depletion date looms large for retirement
security experts, it is unclear whether Congress will take any
immediate action on the issue.
" Private retirement savings seems like an area where
they have been able to reach bipartisan agreement lately,
but Social Security is harder, " says Kathleen Romig a senior
policy analyst at the Center on Budget Policy and Priorities.
lawmakers to find a solution before 2034.
" There's no way that Congress will let benefits not be paid, "
she says. " That's not a realistic concern. But addressing it
now would show that the elected leaders are looking closely
at this and they want to restore some sense of security. "
Regardless of what happens in Congress in the near term,
plan sponsors and their advisers can serve their participants
by educating them about Social Security. Besides
teaching best practices for claiming Social Security, retirement
planning professionals can also help dispel the myth
that the benefit is at risk of disappearing entirely.
" There's a misconception out there that Social Security
is going away completely, and that's simply not true, even if
potential benefit reductions are on the horizon, " says Catherine
Collinson, CEO and president of the Transamerica Institute
and president of the Transamerica Center for Retirement
Studies. " Current concerns focus on the depletion of
Social Security's trust fund, not on its overall ability to pay
benefits, albeit at a lower rate. That's an important distinction
for plan participants to understand. "
" The best case is to plan for Social Security benefits
to be exactly the way they are, " she adds. " But also think
about what are the potential levers that policymakers may
adjust that could affect one's retirement planning. "
-Beth Braverman
8 | planadviser.com May-June 2022
Art by Ellen Weinstein
http://www.planadviser.com
PLANADVISER -May/June 2022

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