Tags: Vernon | Social Security | fund | tax

Expert: Social Security Financial Problems Can Be Easily Fixed

By    |   Tuesday, 05 November 2013 07:30 AM

Social Security is not in financial peril because it relies primarily on payroll taxes, which represent a pay-as-you-go funding source, according to Steve Goss, chief actuary for the Social Security Administration.

But Goss' conclusion, which he stated at the annual meeting of the Society of Actuaries in San Diego, is "unequivocal," Steve Vernon, a consulting research scholar for the Stanford Center on Longevity, wrote in an article for CBS MoneyWatch.

The much-repeated forecasts about the Social Security Trust Fund running out of money in 2033 apparently tell only part of the complete story.

Editor’s Note:
New Video: Obama Plans to Redistribute Seniors’ Wealth

That's because Social Security benefits come from two sources — the trust fund and payroll taxes.

"Even if Congress doesn't act to prevent the Social Security Trust Fund from running dry in a future year, there will still be workers paying taxes into the system, and those taxes will fund the benefits that are due to retirees and beneficiaries," Vernon reported in his analysis of Goss' remarks.

But when the trust fund does run dry, Americans will be faced with a stark choice. Goss' presentation to his fellow actuaries included a chart showing tax revenues could run short of Social Security benefit payouts by 2033 unless something is done.

Any solution is likely to be costly, according to Vernon.

After 2030 and if nothing is done before then, taxes paid into the system are projected to be about 4.7 percent of GDP, but the benefits paid will be about 6.1 percent of GDP.

"To close this gap, either taxes need to be increased by about one-third, benefits need to be reduced by about one-fourth or there needs to be some equivalent combination of revenue increases and benefit reductions," Vernon concluded.

The solution in a nutshell is to eliminate the difference by reallocating the value of about 1.5 percent of the goods and services produced in the United States — either pay more taxes or pay fewer government benefits.

"This doesn't seem like an insurmountable problem. And the sooner our leaders make the necessary changes, the better we'll be able to adjust our plans accordingly and get on with life," Vernon explained.

A new survey by the Associated Press of Americans 50 years of age or older showed most would object to either raising the age at which benefits can be collected or reducing cost-of-living increases.

In 2014, Social Security benefits will go up by only 1.5 percent, which CNNMoney reported is one of the tiniest annual cost-of-living increases ever in the program.

Editor’s Note: New Video: Obama Plans to Redistribute Seniors’ Wealth

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Social Security is not in financial peril because it relies primarily on payroll taxes, which represent a pay-as-you-go funding source, according to Steve Goss, chief actuary for the Social Security Administration.
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2013-30-05
Tuesday, 05 November 2013 07:30 AM
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