HighBeam Research - Newspaper archives and journal articles
Options
Cancel changes
Follow us:
  • Subscription benefits
  • Log in
  • Sign up for a free, 7-day trial
  • Publications
  • Research topics
  • Topics home
  • People
    • Artists and Entertainers
    • Company executives
    • Historical figures
    • Politicians and Government officials
    • World Leaders
  • Issues and Events
    • Health and Medicine
    • Historical Events
    • Religion and Theology
    • Science and Technology
  • Places
  • Organizations
  • A-Z
    • A-G
    • H-O
    • P-T
    • U-Z
    • 0-9
  • Publications home
  • Journals
    • Academic journals
    • Business journals
    • Education journals
    • Math and Engineering journals
    • Medical journals
    • Science and Technology journals
    • Trade journals
  • Magazines
    • Business magazines
    • Computer magazines
    • Education magazines
    • Industry magazines
    • Lifestyle magazines
    • Medical magazines
  • Newspapers
    • International newspapers and newswires
    • Reports, newsletters, and transcripts
    • U.K. newspapers
    • U.S. newspapers and newswires
  • Reference works and books
    • Almanacs
    • Dictionaries and thesauruses
    • Encyclopedias
    • Non-fiction books
  • Subscription benefits
  • Log in
  • PUBLICATIONS HOME
  • Journals
    • Academic journals
    • Business journals
    • Education journals
    • Math and Engineering journals
    • Medical journals
    • Science and Technology journals
    • Trade journals
  • Magazines
    • Business magazines
    • Computer magazines
    • Education magazines
    • Industry magazines
    • Lifestyle magazines
    • Medical magazines
  • Newspapers
    • International newspapers and newswires
    • Reports, newsletters, and transcripts
    • U.K. newspapers
    • U.S. newspapers and newswires
  • Reference works and books
    • Almanacs
    • Dictionaries and thesauruses
    • Encyclopedias
    • Non-fiction books

Home » Topics » Issues and Events » Social Security » Social Security Funding Shortfall

  • Print

Social Security Funding Shortfall

By Dan Weisman For more information, see: Social Security
  • Permalink

    Create a link to this page

    Copy and paste this link tag into your Web page or blog:

    <a href="https://www.highbeam.com/topics/social-security-funding-shortfall-t10955" title="Social Security Funding Shortfall - Pictures, News and Articles - HighBeam Research">Social Security Funding Shortfall - Pictures, News and Articles - HighBeam Research</a>

  • RSS

    Your RSS feed has been created

    If your RSS reader did not automatically grab the feed, you can copy and paste the URL below into your RSS reader.

    http://services.highbeam.com/rss/HBR/Social+Security+Funding+Shortfall?sort=dt&sortdir=d

Overview

Before Social Security came to pass into law in 1935, almost half of elderly Americans lived below the income poverty line, according to the Center on Budget and Policy Priorities. The Social Security system was created as a transfer payment program whereby current worker earnings were converted into future income. Around 12 percent of elderly citizens today are considered poor, which is considered a tribute to the system. Income is transferred from those working to retirees. It has been based on the assumption that each subsequent generation would be able to continue contributing enough to keep the system of retirement payments solvent. While Social Security has not experienced funding shortfalls through 2011, the declining number of workers paying into the dedicated fund coupled with increasing number of claimants were expected to create funding shortfalls of increasing amounts threatening fund surpluses and savings by 2037 with the first budget shortfall in 2012. Social Security at some point would have to cash in its Treasury Bills before going into deficit. However, some kind of action is expected involving additional funding or benefit re-adjustments. The most surprising aspect of the entire Social Security funding shortfall issue, though, may be the fact the program trust fund has built up a $2.5 trillion surplus since 1985. However, the surplus was tapped by Congress and the federal government repeatedly to pay for other programs, sapping much of the surplus.

History/Proposed Changes

Social Security came into law with legislation signed in 1935. The early days of the Social Security program paid benefits when workers reached age 65 and were fully retired. Congress changed the retirement age numerous times; as of 2011, 62 is considered retirement age.

Various solutions have been proposed to alleviate expected funding shortfalls. These include:

  • Reduce the Social Security cost-of-living adjustment.
  • Increase the number of years used in calculating Social Security retirement and survivors' benefits.
  • Modify the formula used to calculate initial benefits.
  • Increase retirement age to age 67.
  • Reduce or eliminate benefits for workers with higher incomes.
  • Raise Social Security payroll tax rates.
  • Increase the portion of Social Security benefits subject to IRS payments.
  • Increase the amount of earning subject to the Social Security tax.
  • Extend Social Security coverage to all new employees of local and state governments (who are now Social Security excluded and covered by state plans).
  • Invest Social Security reserve funds in the stock market.
  • Use Treasury Department general revenues to make up the long-range deficit.
  • Require or allow workers to invest a portion of their wages into individual retirement investment accounts.
  • Use budget surpluses from other agencies to provide individual investments accounts.
  • Return to pay-go funding, setting payroll taxes at levels needed to fund benefits.

The entire $5.3 trillion shortfall over the next 75 years could be wiped out if payroll taxes for workers and employers increased 1.1 percent, according to the U.S. Senate Special Committee on Aging. Or, if annual cost-of-living increases were reduced 1 percent by Congress, about three-fourths of the shortfall would evaporate, the committee said.

Present Day

The individual earnings cap is $106,800 in 2011 with employees paying a 6.2 percent Social Security tax. That employee tax is matched by employers. While benefits can be collected starting at age 62, full benefits can only be claimed if started at age 66 or later. Social Security also provides disability benefits for more than 5 million disabled workers with severe physical or mental impairments preventing them from working. Family benefits are provided to about 3 million spouses and 2 million children of retired and disabled workers. Survivors' benefits are paid to more than 7 million survivors -- 2 million of which are children -- of deceased workers.

Social Security actually continues to run surpluses from its dedicated funding source, taxpayers. That surplus is expected to end. It is invested in U.S. Treasuries considered the world's best investment. However, with baby boomers retiring and birth rates declining, the surplus is expected to end at some point before 2037.

Social Security paid out $727 billion in 2011, or about 4.8 percent of national gross domestic product, according to the Congressional Budget Office (CBO). By 2021, CBO estimated Social Security payments would be about $1.3 trillion, about 5.3 percent of GDP, providing benefits for 71 million people. Debates about proposed plans to deal with projected Social Security funding shortfalls revolved around issues including fairness and the actual extent of the problem.

Read more

Related articles in the news

Democratic candidate for Illinois House, 25th District: Grace Chan McKibben

Chicago Sun-Times; March 5, 2018

Democratic candidate for Illinois House, 25th District: Grace Chan McKibben
On Jan. 25, Grace Chan McKibben appeared before the Chicago Sun-Times Editorial Board. We asked her why she's running for the Illinois House of Representatives in the 25th District:My name is Grace Chan McKibben. I have lived in the 25th District for over 30 years and I have worked in higher…
German Defense Chief Criticizes Trump's Militaristic Approach

The Washington Post; February 18, 2018

German Defense Chief Criticizes Trump's Militaristic Approach
MUNICH - German Defense Minister Ursula von der Leyen denounced President Trump's military-heavy approach to global affairs Friday, saying the United States is shortchanging diplomacy and soft power in favor of a dangerous overreliance on its military.The tough criticism, made to an audience of the…
Advice from the 401(k) Millionaire Next Door

The Washington Post; October 29, 2017

Advice from the 401(k) Millionaire Next Door
If you have a 401(k) or similar workplace retirement plan, you need to be up in arms.As part of the GOP's push to overhaul the tax code, some in Congress want to drastically reduce the amount of pretax money you can contribute to this savings plan. Simply put, one of the best investment vehicles…
Pension Fund at T Faces $1B Shortfall

The Boston Globe (Boston, MA); May 22, 2017

Pension Fund at T Faces $1B Shortfall
The MBTA Retirement Fund will need $1 billion in additional taxpayer funding over the next 18 years if it is to pay retirees as promised and remain solvent, according to a report the transit authority's chief plans to present at a public meeting Monday.The shortfall is due not only to mediocre…
MBTA Pension Fund Needs $1 Billion, Report Says

The Boston Globe (Boston, MA); May 21, 2017

MBTA Pension Fund Needs $1 Billion, Report Says
The MBTA Retirement Fund will need $1 billion in additional taxpayer funding over the next 18 years if it is to pay retirees as promised and remain solvent, according to a report the transit authority's chief plans to present at a public meeting Monday.The shortfall is due not only to mediocre…

From the archive

OPTIONS AVAILABLE TO CLOSE SOCIAL SECURITY FUNDING SHORTFALL.

States News Service; September 10, 2009

OPTIONS AVAILABLE TO CLOSE SOCIAL SECURITY FUNDING SHORTFALL.
WASHINGTON-- -- The following information was released by the Employee Benefit Research Institution: A number of options available to eliminate the Social Security program's long-term funding shortfall are presented in a review published today by the nonpartisan Employee Benefit Research Institute…
How Big Is Social Security's Funding Shortfall? Close Up

The Seattle Times (Seattle, WA); August 13, 2012

How Big Is Social Security's Funding Shortfall? Close Up
Byline: Stephen Ohlemacher; The Associated Press WASHINGTON -- Social Security's long-term funding shortfall is big by any measure. How big? That depends on how you look at it. Over the next 75 years, after Social Security drains its trust funds, the massive program is scheduled to pay out $134…
Greenstein: Social Security Trustees Confirm Long-Run Shortfall, Though...

States News Service; July 22, 2015

Greenstein: Social Security Trustees Confirm Long-Run Shortfall, Though Not an Imminent Crisis
WASHINGTON -- The following information was released by the Center on Budget & Policy Priorities: by Robert Greenstein CBPP President Robert Greenstein released the following statement on the 2015 Social Security trustees' report: Social Security can pay full benefits until 2034, the new trustees'…
Funding Shortfall for Social Security Disability Program: Is It Real?

The Christian Science Monitor; February 13, 2015

Funding Shortfall for Social Security Disability Program: Is It Real?
Byline: Mark Trumbull In the wake of Republican victories in the election last fall, pundits warned that Congress would be at loggerheads with President Obama on a number of budget issues in 2015, including over highway funding and the Department of Homeland Security. Not high on the list of hot…
Social Security: Long-Term Financing Shortfall Drives Need for Reform.

General Accounting Office Reports & Testimony; July 1, 2002

Social Security: Long-Term Financing Shortfall Drives Need for Reform.
GAO-02-845T June 19, 2002 Social Security not only represents the foundation of our retirement income system; it also provides millions of Americans with disability insurance and survivor's benefits. Although the Social Security Trustees now project that under the intermediate or "best estimate"…

Find all articles about this topic

  • Company
  • About us
  • Subscription benefits
  • Group subscriptions
  • Careers
  • Privacy policy
  • Terms and conditions
  • Contact us
  • Help topics
  • FAQ
  • Search tips
  • Using the Research Center
  • Billing questions
  • Rights inquiries
  • Customer Service
  • Cengage Learning Network
  • Questia
  • CengageBrain.com
  • HighBeam Business
  • ed2go
  • MiLadyPro
  •  
HighBeam Research
Follow us:

HighBeam Research is operated by Cengage Learning. © Copyright 2018. All rights reserved.

The HighBeam advertising network includes: womensforum.com GlamFamily