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Ric Edelman, founder of Edelman Financial Engines

Retirement Planning > Social Security > Social Security Funding

My Wacky Idea to Save Social Security

By Ric Edelman

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The Social Security Administration says its trust funds will be depleted in 2033, one year sooner than was projected last year. This is because there are too few workers paying Social Security taxes and too many retirees receiving benefits.

Congress has 10 years to solve the problem; if it fails, all retirees will suffer a 23% cut in benefits, starting in 2034.

Do you think Congress will reduce benefits? Hardly. All the bills introduced so far increase, rather than decrease, benefits.

H.R. 82 would eliminate the Windfall Elimination Provision and the Government Pension Offset; H.R. 521 would guarantee both current benefits plus inflation-based increases; H.R. 1046 would actually increase benefits by $2,400 per year; and S. 424 would require a two-thirds majority in order to enact any benefits cuts.

It also looks like Congress is watching closely what’s going on in France, where millions of protesters refuse to accept President Macron’s increase in the retirement age (from 62 to 64).

The sad truth is that everyone seems to be in denial.

Today’s Reality

When the Social Security system began in 1935, there were 135 workers for each retiree. That meant lots of people were paying taxes and putting money into the system while very few people were receiving money from it.

But demographics have shifted in ways FDR could not have predicted.

Today, there are only three workers for each retiree. This is partly because women are having fewer babies than they did in the 1930s, 1940s, 1950s and 1960s. It’s also partly because innovations in public health and medical science have extended life expectancies, from the 50s in 1930 to the 80s today.

FDR assumed that you’d retire at 62 and die by 65; the Social Security system worked well when people paid into the system for 40 years and withdrew from it for three years. The system was never meant to pay benefits to anyone for 20, 30 or 40 years — but that is now routinely occurring.

The result? SSA says it’s collecting only 77% of the money it needs to pay benefits. So where’s the other 23% of benefits coming from? The Social Security Trust Fund. And that bucket will be empty by 2033.

The law says SSA can only pay out whatever money it has — for now, that means tax revenue plus trust fund assets. But when the trust fund is depleted, SSA will be limited to Social Security tax revenue.

That’s why all retirees will suffer a 23% cut in 2034.

It would seem that there are only two solutions available to Congress: cut benefits or increase taxes. But I have an idea that might solve the problem in a different way. Instead of reducing/delaying benefits or raising taxes, why don’t we just appeal to everybody’s sense of patriotism instead?

If I was the president, I would say the following to the American people:

“You’ve worked hard, you’ve paid a lot of money into the Social Security system for decades. You’re entitled to receive all the Social Security benefits you deserve in your retirement. But the Social Security system is in trouble, and it cannot survive without our help.

So, I’m asking you to voluntarily reduce the amount of money that you are entitled to receive from Social Security. If you’re one of the country’s 22 million millionaires, you can probably afford to give up your entire Social Security check. But I’m not asking that, or any amount. Even if you’re not a millionaire, perhaps you can agree to reduce your monthly check by five dollars.

We’re not proposing any law that takes your money away from you. But I’m asking you to please recognize that we simply don’t have the money to continue paying all this money to everyone. So, will you please join us in voluntarily reducing the amount of your Social Security benefit?

You can change your mind at any time, and we’ll restore your monthly income to its full amount. Together, we can solve the Social Security crisis and protect the tens of millions of American retirees who depend on that money.”

What’s Next?

Well, it’s been a few weeks since I offered up this innovative idea on my podcast, The Truth About Your Future. I asked my audience if the idea is brilliant or wacky, and you can imagine all the feedback I received.

But I’ve now reached the conclusion that my idea will never work, due to a survey just released by The Wall Street Journal and NORC at the University of Chicago.

Their poll, which has been conducted yearly since 1998, shows that an appeal to patriotism would fail. In 1998, 70% of U.S. adults called patriotism “very important.” But now, only 38% say so. The figure drops to just 23% for adults under 30.

What has happened to cause this radical reduction in patriotism?

Well, since 1998, we’ve experienced the dot-com bubble burst, 9/11, the 2008 financial crisis, social review of police treatment of blacks and the LGBTQ+ community, the MAGA movement, the Woke movement, COVID-19 and more. And perhaps the worst of this list is the horrible name-calling and infighting between the political parties and the media’s participation in that fight.

Small wonder, then, that just about everything that once mattered to Americans no longer does. The survey shows that only 23% of adults under 30 say having children is very important. Only 31% say religion is very important. Only 60% say hard work is very important.

But there’s one area where importance has risen, and this is equally true for both Republicans and Democrats: There’s a 30% increase in the view that money is very important.

So, my idea to save Social Security — asking people to be patriotic and give up some of their money — was dead before it even got started. I’m sorry to say that you need to prepare your clients for massive tax increases, because that is how Congress is going to address this crisis.

And I haven’t even mentioned Medicare and Medicaid. I’ll save that for another time.

Ric Edelman is an author and founder of RIA Edelman Financial Engines (earlier Edelman Financial Services). He now leads the Digital Assets Council of Financial Professionals, or DACFP, which recently formed a strategic partnership with the Financial Planning Association to provide educational programming and content to help FPA members understand the complexities of cryptocurrencies and how these issues can affect their clients’ financial plans.

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