Play the Social Security Game
Politicians may be too chicken to fix Social Security’s financial problems, but what about you? Can you make the politically tough decisions to shore up the system?
Find out by playing the Social Security Game, created by the American Academy of Actuaries. The online game gives potential fixes and the pros and cons of each option.
For instance, raise the age to get full retirement benefits to 70 by 2030, and all of Social Security’s solvency problems are cured. But workers in physically demanding jobs won’t be happy because they may have to work longer longer. And employers won’t be too pleased, either, because older workers mean higher health care costs.
Right now, the program runs at a $2.2 trillion surplus. But with millions of baby boomers retiring in the next several years, the picture changes. By 2017, Social Security will begin paying out more in benefits than it collects in taxes. By 2041, the surplus is spent. There are still enough taxes from workers and employees, though, to pay 78 percent of promised benefits.
So, how would you fix this shortfall? Play the game and let us know the choices you made.
Sam Davis of Towson played the game recently. He says he took a bite “from present, near future retirees, and younger workers.” He favors accelerating the increase in the retirement age to 67, reducing cost of living adjustments starting next year and raising the amount of wages subject to Social Security taxes. These steps are more than enough to fix the system’s problems.
“It boggles my mind to think that our legislators couldn’t solve this problem given the great info available,” he writes.
Play on!
Comments
I played that AAA game years ago, and as I recall I did well.
First, a question: do the proceeds from taxes on SS payments get earmarked for SS or are they general revenue? If not earmarked, I'd recommend that.
The main feature of SS seems to be that it is self-supporting: all payments must come from FICA taxes (or interest on what SS lends to the treasury.) If that is kept then the only things one can alter are the taxes and the benefits.
I suggest that SS be kept exactly as it is, with one modification. Each year determine the next year's SS payments exactly as now. Based on that, do a 50-year projection into the future. If that projection is still in the black, do nothing. If it is in the red, reduce the payments (across the board) by 1%. Do that every year, using the resulting benefit rate for the next year's calculation. That ought to keep the system solvent, with no other change. Obviously it is a reduction in benefits, but it is, each year, a moderate reduction. Note that, for instance, the cumulative effect of 30 such 1% reductions (over a 30 year period) is a 26% reduction. That is substantial. If the projection shows balance or a surplus, of course, there is no reduction at all for that year. Eventually that should become the norm.
Along with that there is always the option for Congress to increase the FICA rate, if the annual benefits sink to being grossly insufficient.
Posted by: Brad Spencer | September 4, 2008 9:15 AM
First of all, quit putting the payroll tax monies into the general fund. It should all go into the Social Security fund. When LBJ started diverting the money into the general fund is when we started developing problems. Increase the amount of withholding up to a limit of $125 K per year.
Posted by: Jim Pullen | September 4, 2008 10:46 AM
Any proposed "fix" does not fix SS unless REAL money is deposited into the SS Trust Fund, instead of worthless IOUs. This, of course, can only happen if the federal budget gets to a surplus, itself, not a deficit of what could be $700-800 billion this fiscal year, when the SS surplus of about $200 billion is added in. All the "fixes" just play games with the phony amount in the Trust Fund. Yes, about $2.2 trillion should be there. If it were, we would not be having this discussion!
Posted by: George Fulmore | September 6, 2008 2:00 AM