We’ve long heard warnings that the Social Security program that 52 million Americans rely on for their retirement benefits could one day run out of money.
Analysts say that’s not going to happen — if only because older people are such a powerful voting force — but this year the system has hit a worrisome milestone: the Social Security Administration reported that the retirement benefits paid out each month exceeded the tax revenues and interest that fund the program.
That necessitated the first dip into the Social Security Trust Fund in 35 years. By 2034, the agency estimated, it will have depleted those reserves, and its revenues will cover only about four-fifths of its promised benefits.
“There’s a problem, but not a crisis,” said Andrew Eschtruth, a researcher at the Center for Retirement Research at Boston College. “It’s something policymakers have acted on before, and the program has always paid full benefits.”
Making adjustments to keep Social Security solvent, crucial as that is, represents only one of the issues confronting Congress. It could also correct outdated aspects of a program that serves nearly 90 percent of Americans over 65.
“It’s a good time to step back and try to make Social Security more effective,” said Richard Johnson of the Urban Institute, author of a new report on raising the program’s retirement age.
The fixes will likely include changes designed to bring more money in and pay less out. Imposing a higher payroll tax or raising the level of earnings subject to Social Security taxes (as of January 1, they will apply to the first $132,900, already an increase) would bolster revenues.
Money-saving measures could include reducing benefits for high earners and trimming the number of years that workers collect benefits by raising eligibility ages. Typically, such changes phase in for younger workers, not those already receiving Social Security or on the cusp of qualifying for benefits.
The demographic imperatives underlying these options are evident. With baby boomers retiring, the system has more beneficiaries to support. Longer life expectancies — about five additional years over the past several decades — and improved health have meant that “people can certainly work longer than they could in 1960,” Dr. Johnson said.
Social Security now allows workers to claim benefits at age 62, though they’ll receive bigger checks if they wait until their full retirement ages (66 to 67) or beyond. The average monthly payment this year: $1347.46.
Working longer and claiming benefits later — trends already well underway — pay off in ways that extend beyond Social Security itself. “It’s good for people, it’s good for government tax revenues and it could fuel economic growth,” Dr. Johnson said.
But as his report points out, living longer doesn’t always mean people can work longer. Higher-income professionals may opt to stay on the job, he said, but “health problems are increasingly concentrated among less educated workers and they’re falling farther and farther behind” economically. Moreover, even those who could work often discover that “employers don’t seem eager to hire 62 year olds.”
The Urban Institute report suggests raising the early entitlement age to 65 and the full retirement age to 70, but building in safeguards for those who can’t work, perhaps through Social Security’s other programs.
The agency could provide a safety net by fattening benefits for the very low-income. It could expand its Supplemental Security Income (SSI) program, restructure the way its disability insurance works or provide partial benefits for workers who aren’t totally disabled.
While some think tanks and congressional staffs are exploring ways to strengthen Social Security financially, others are looking into outmoded provisions that penalize beneficiaries, primarily women.
Senator Bob Casey, Democrat of Pennsylvania, has introduced legislation intended to help widows, widowers and divorced spouses qualify for higher payments and receive benefits earlier if they’re disabled.
“This bill would boost the incomes of Social Security recipients who are most likely to be living in poverty, the majority of whom are women,” Mr. Casey, ranking member of the Senate Special Committee on Aging, said in a statement.
Speaking of women and Social Security, another effort would award work credit for those who temporarily leave the labor force because of caregiving responsibilities.
In the 1930s, when the Social Security Act was passed and then amended, policymakers assumed that women stayed home while men worked. Spousal and survivors benefits represented an attempt to provide for wives (and minor children) who had no work histories of their own.
“Major demographic changes over 80 years have led to fewer women qualifying for spousal benefits,” said Mr. Eschtruth, co-author of a recent international survey of caregiver credits.
The researchers found that 23 percent of Social Security dollars went to spousal and widows’ benefits in 1960, compared to only 11 percent in 2016. That’s partly because a growing proportion of women no longer marry, or have marriages that don’t last 10 years, the threshold to qualify for divorced spouse benefits.
It also reflects the fact that as women have poured into the work force, they may qualify for Social Security retirement benefits based on their own work histories. But because women earn less and are more likely to have spent uncompensated years as caregivers, their retirement benefits can still suffer.
“To what extent does society place a market value on caregiving?” Mr. Eschtruth asked. The answer, at the moment, is that it barely does, at least in the United States.
Most other industrialized countries credit some years of caregiving when calculating retirement benefits, the Boston College survey found. In the United Kingdom and Germany, those credits cover care of older people, as well as children.
Legislation introduced by Senator Chris Murphy, Democrat of Connecticut, last year would incorporate caregiving when calculating a person’s future Social Security benefits. To qualify, a person would have had to provide 80 hours of care a month to a “parent, spouse, domestic partner, sibling, child, aunt or uncle” who needed assistance with daily activities. The caregiver would be credited with a modest wage for up to five years.
Alas, none of these changes seems imminent.
The last time Congress made major adjustments to Social Security, in 1983, “we didn’t get change until the trust fund was at high risk of being unable to pay benefits,” Dr. Johnson said. This round, too, might involve brinkmanship and delay, at least until after the presidential election.
“Any kind of change is going to be painful for someone,” he said, “so there’s a big incentive for Congress to kick the can down the road.”