Debt impasse or not, Social Security reform is comingHere's how proposals would change your retirement benefits
By John W. Schoen -Senior Producer - msnbc.com
updated 2 hours 36 minutes ago
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No matter what plan emerges from the debt talks in Washington, future Social Security benefits will be trimmed back. As Congress and the White House continue their dysfunctional dance toward financial Armageddon, the elusive, $4 trillion Grand Plan that would include Social Security and Medicare reform has fallen off the table.
But in the early stages of the budget battle, a series of proposals surfaced that provide clues to what broad reform of Social Security might look like. There’s widespread agreement that the program needs fixing. When first created in 1935, the earliest retirement age was 65, a year older than the average life expectancy. Today, with the average life expectancy at 79, beneficiaries can begin collecting at 62 and might well live for decades into retirement.
Meanwhile, the base of support from workers paying into the system has shrunk dramatically. In 1950, there were 16 active workers paying for every retiree. Today the ratio is three to one, according to the bipartisan National Committee on Fiscal Responsibility and Reform, a committee appointed by President Barack Obama and chaired by former Sens. Alan Simpson and Erskine Bowles to come up with a plan to cut the budget deficit.
With more money flowing out and less money flowing in, and the baby boom generation hitting retirement age in force, the Social Security trust fund is expected begin shrinking by 2015. By 2037, the fund is projected to run out of cash, which means it could only pay out as much as it takes in. That would force immediate benefit cuts of about 25 percent if no changes were made before then.
Unless the program can be made to pay for itself, Congress would have to appropriate more than $13 trillion over the next 75 years to make up the shortfall, according to the Brookings Institution.
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