If so many of us are barely saving enough for our retirement years, can we really afford to rely on a smaller Social Security benefit?
That's the situation Americans are facing in 2033, when Social Security's trust fund is projected to be exhausted, and retirees will be paid just about 75 percent of their benefit.
To reignite the debate over how to close Social Security's funding gap, a panel of experts gathered at a Capitol Hill forum on Tuesday and urged lawmakers to "shake off their complacency" and take action now, not years from now.
"We're already late in the game" to enact changes to the system, says Charles Blahous, a Social Security public trustee. "We're playing with fire."
The renewed debate over how to strengthen Social Security comes just two days after the 2013 annual trustees report was released. It showed that the retirement program's reserves will be depleted 20 years from now -- in 2033.
To discuss alternatives that would prevent Social Security from running short on funds, the Committee for a Responsible Federal Budget, the Washington think tank Third Way and the Mercatus Center at George Mason University sponsored the forum and invited the panel of experts to weigh in.
Among the proposals:
- Modify the benefits structure and raise the age at which a worker can collect full Social Security.
- Eliminate or phase out the cap on earnings subject to Social Security payroll tax.
- Gradually raise the tax that workers and employers pay toward Social Security.
- Use a different formula to measure inflation and Social Security cost-0f living adjustments.
- Cut Social Security taxes for adults who stay in the workforce later.
- Phase out benefits for high earners ($150,000 to $250,000 for individuals; $200,000 to $400,000 for couples).
Some of those ideas might not be popular with politicians. But there's not a lot of time to sit around and pontificate. Jim Kessler, a senior vice president for Third Way, pointed out that it was just six years ago that Social Security's trust fund was predicted to be exhausted in 2042. Now that scenario has been moved up in part because no action has been taken to shore up the program.
"We should all be stunned and disappointed" by legislators' failure to act, he says.
The Medicare trustees report was also released on Friday. Like the Social Security report, it issued projections for the hospital insurance's trust fund over the next 75 years.
But unlike the Social Security report, it said that Medicare's outlook had improved. It said Medicare will be able to pay full benefits until 2026, two years later than projected last year. Social Security's trust fund outlook remained unchanged from last year's projection.
"You can't put a defined benefit system like Social Security on auto pilot forever," Virginia Reno, vice president for income security at the National Academy of Social Insurance, told the forum. "It's not a savings account.
"It needs to respond to demographic changes," she adds, referring to the gigantic boomer generation that will no doubt tax the program.
Nancy LeaMond, AARP's executive vice president, called for "an honest, open national debate about the value of Social Security and its importance" to millions of beneficiaries.
"Too many politicians in Washington talk about changes to Social Security without considering the impact in income security such changes will have on real people," LeaMond said in a statement.