The 2020 Social Security Trustees 2020 report is out — and while the COVID-19 pandemic has generated some uncertainty about short-term funding, the long-term picture is still strong for “America’s pension plan”:
- With $2.9 trillion in Trust Fund reserves, plus ongoing contributions from payroll taxes, Social Security has projected funds sufficient to pay full benefits for 15 more years.
- If policymakers take no further action, Social Security will be able to pay 79 percent of benefits starting in 2035 (the same year predicted in last year’s report).
- Policymakers have tools they can use help protect Americans from the pandemic’s financial impact now, and strengthen Social Security’s finances for the future.
The COVID-19 pandemic will certainly impact Social Security’s near-term financial outlook, though at this point it’s difficult to estimate the magnitude those change. However, it’s clear the pandemic will have a huge impact on many Americans’ ability to save for retirement.
The pandemic has caused massive job losses, which often force people to draw down their already meager retirement funds to make ends meet. Overall median retirement savings for 60-64 year olds are just $32,550 per household (by the most generous definition), according to the 2019 Federal Reserve Survey of Consumer Finances — and 43% of Americans have no retirement savings at all.
That’s why the most responsible solution to Social Security’s long-term funding shortfall is also the right way to ensure Social Security meets the needs of today’s retirees and those about to retire: raise the cap on earnings subject to Social Security taxes (currently set at $137,700 in 2020) to increase Social Security revenues, and fund a broad-based expansion of benefits.
Social Security is a popular program — people of all political persuasions want to protect it from cuts, and overwhelmingly want to see it expanded. It is also extremely affordable – and will remain that way. By 2095, Social Security will constitute just 6.07 percent of America’s GDP. That is considerably less than Germany, Austria, France, and most other industrialized countries spend on their counterpart programs today.
With over half (52 percent) of American households headed by someone of working age who will not be able to maintain their standards of living in old age (rising to roughly two-thirds when health and long-term care costs are also considered), expanding and improving Social Security is the obvious solution to the nation’s looming retirement income crisis.
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