Social Security may be at risk after the November elections...The stage is being set for benefit reductions. Cutting benefits would be a huge mistake, given that half the private sector workforce does not participate in an employer-sponsored retirement plan and that those lucky enough to participate in a 401(k) have combined 401(k)/IRA balances of $111,000 as they approach retirement. Therefore, it is very important to take a hard look at the emerging characterization of the Social Security program.Munnell is not just a columnist spouting off. Every four years, Social Security establishes a Technical Panel to evaluate the Trustees’ projections. In 2015, she chaired the Panel.
She writes that the 2015 panel suggested:
A more rapid mortality improvement, which means that people will live longer and receive more total Social Security benefits; lower fertility, which reduces the population at working ages relatively to the elderly population; and lower interest rates, which mean that revenues and benefits are discounted by a lower number. These cost-increasing changes raised the 2.68 percent deficit in the 2015 Trustees Report to 3.42 percent.The Congressional Budget Office has an even higher deficit number: 4.37%.
Bottom line: Social Security is getting deeper and deeper into the red. Once the elections are over cuts in benefits are a very real possibility.
Anyone counting on benefits based on current schedules is going to be in for a rude surprise.