Social Security Cliff in Sight

Mike Shedlock

“For the first time since Social Security's cash crisis in 1983, the program can't afford to pay full benefits for its youngest crop of new retirees through life expectancy, government data show.

The hastening of the Social Security Trust Fund's demise to 2033 means that workers just becoming eligible for Social Security at age 62 face steep future benefit cuts if they live to the average life expectancy, now about 84.

Those abrupt benefit cuts of about 25% a year for today's 62 year olds and workers nearing the early retirement age would come at an especially bad time — late in life when savings have dwindled and health care bills are on the rise.

While the trust fund's nonmarketable Treasuries — really IOUs from one branch of government to another — have no value to offset the cost of benefits, they provide Social Security the legal authority to run cash deficits until they're spent.

Under current law, a worker who just turned 62 would face a 25% benefit cut once the trust is spent in early 2033.

Workers now 55 would, on average, lose two full years' worth of benefits, the equivalent of a 9.2% cut in lifetime benefits.”

The current deficit is real, not imagined, and Social Security is already insolvent. The system needs shoring up, and Shedlock has six suggestions: raise retirement age; raise or eliminate the cap on payroll taxes; cut benefits; collect Social Security on personal income; implement a tiered cap structure; means testing.

source:globaleconomicanalysis