Broker Check

Will Social Security be there for you?

January 17, 2020

“Will Social Security be there for me” is probably the most common question we receive, and like most government programs the answer is “it depends”.

Let’s start with the current facts. According to the 2019 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds (Social Security) starting in 2035 only 80% of the expected benefits will be payable to claimants. What you’ve probably read is that starting in 2035 everyone collecting benefits will get a 20% haircut on those benefits, and we’d agree that sounds awful. But we should ask ourselves, is that probable.

In our view saving Social Security is less of a math problem, and more of a political issue. It’s often said a politicians #1 goal in life is to get re-elected. If there’s any truth to that belief it’s logical to conclude politicians don’t want to upset their voter base so they keep getting votes and stay in office. Well then, who are the politicians trying to keep the happiest? Said differently, who shows up at the polls most often? The answer is the Baby Boomers, the very people who are collecting Social Security or who are close to collecting Social Security.
So, in our opinion, we don’t predict major changes for those now collecting Social Security or those about to collect Social Security. There certainly will have to be changes, but for whom? It would make the most sense to get into the pockets of the largest population in the US. Brian & Colin, isn’t that the Baby Boomers, the group you just predicted may not see major changes? The answer is no. The largest population in the US as of now is the Millennials, the citizens born between 1981 and 1996. The Millennials haven’t quite hit their peak earnings years as a group and considering the oldest of the Millennials is only 39 years old they certainly don’t have Social Security on their mind right now. On top of that, Millennials haven’t been showing up at the polls in the numbers the Baby Boomers do. So, we ask – is it possible that the politicians may find a way to help pay for Social Security for the Baby Boomers by adjusting the program for when the Millennials are ready to collect? We think so. Millennials may see higher FICA, lower benefits, and older claiming ages by the time they’re ready to tap into the system.

Is this a uniquely dire situation for Social Security? No, a similar situation occurred in 1983 during the Reagan administration. Reagan formed a commission lead by Alan Greenspan (yes, that Alan Greenspan) that enacted several changes (to include taxation of benefits, increasing FICA, gradually increasing full retirement age) that have kept Social Security solvent since then. Isn’t it interesting that in 1983 the oldest member of the largest generation at THAT time, the Baby Boomers, was 37 years old and are now seeing the effects of the 1983 changes? The oldest member of the largest population now, the Millennials, is 39 years old and will probably see the effects of any upcoming changes when they go to claim more than 20 years from now. One could argue the Baby Boomers paid for Social Security for the Greatest Generation, and maybe the Millennials will pay for the Social Security for the Baby Boomers.
Of course, Congress can change the rules pretty much any time they want. However, all those folks in Congress want to make sure they still have their seat when it’s time for us to vote and might not want to rock the boat too much for the Baby Boomers.