What Trump and Clinton aren't telling you about Social Security
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On Aug 14, 1935, Social Security was signed into law by President Franklin D. Roosevelt. Today, some 80 years later, the program is on the road to insolvency.

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When asked during the presidential primaries how he would reform Social Security, Donald TrumpDonald John TrumpBiden says voters should choose who nominates Supreme Court justice Trump, Biden will not shake hands at first debate due to COVID-19 Pelosi: Trump Supreme Court pick 'threatens' Affordable Care Act MORE stated, "I wouldn't change a thing." For her part, Hillary ClintonHillary Diane Rodham ClintonThe Memo: Trump furor stokes fears of unrest Bloomberg rolls out M ad buy to boost Biden in Florida Hillicon Valley: Productivity, fatigue, cybersecurity emerge as top concerns amid pandemic | Facebook critics launch alternative oversight board | Google to temporarily bar election ads after polls close MORE wants to expand the program.

Before you decide which candidate offers the best solution to keep the program viable, you should understand how Social Security works and the problems it faces.

Social Security consists of the Old-Age and Survivors Insurance (OASI) program, which pays monthly benefits to retired workers, their families, and the survivors of deceased workers; and the Disability Insurance (DI) program, which pays monthly benefits to disabled workers and their families.

The OASDI program currently provides benefit payments to 60 million people — 43 million retired workers and dependents; 6 million survivors of deceased workers; and 11 million disabled workers and dependents. With thousands of baby boomers turning 65 daily, the number of beneficiaries is projected to rise to 90 million by 2033.

The vast majority of America's workforce pays 6.2% of their earnings to the government in employment taxes. An additional 6.2% is paid by employers for a total of 12.4% of earnings. Through the years, the amount of earnings subject to the employment tax has continuously risen. For example, the cap on earnings was $39,600 in 1985; $61,200 in 1995; $90,000 in 2005; and $118,500 in 2015.

Groups exempt from paying employment taxes include some federal, state and local employees, i.e., some teachers, police and firefighters, state prison workers and other government workers; clergy and religious orders; and foreign nationals, as long as the work they perform is for their foreign government.

According to the latest Social Security Trustees Report, in 2015 the government collected $795 billion in employment taxes, $31.6 billion in taxes retirees pay on their benefits, and $93.3 billion in interest on the $2.81 trillion trust fund.

The interest earned is a "non-cash" book entry. Thus, the total amount collected in "actual cash" for 2015 was $826.6 billion.

In 2015, the government paid out $891.0 billion in cash benefits and $6.2 billion for administration costs. The total "cash" payout was $897.2 billion.

That means an additional $70.6 billion (the amount that is needed after subtracting the cash payout from the amount collected) came from the U.S. Treasury, which borrowed the money by issuing bonds to public and foreign investors.

In 1960, five workers supported every Social Security recipient. From 1974 to 2008, the ratio fluctuated from 3.2 to 3.4. In 2015 the ratio was 2.8, and it's expected to drop to 2.2 by 2035. Without changes, the Social Security Trustees estimate a 75-year program shortfall of $11.4 trillion.

In 2015, the Social Security Trust Fund balance was $2.813 trillion. But this amount is nothing more than an accounting number in a government ledger. The trust fund number changes monthly as employment taxes are received and benefits are paid. If benefit payments exceed payroll tax revenue ($70.6 billion in 2015), the government must borrow the difference.

As things stand, the trust fund should be depleted by 2034.

For the combined OASI and DI Trust Funds to remain fully solvent throughout the 75-year projection period, an immediate and permanent payroll tax increase of 2.58 percentage points to 14.98% would be required. In addition, an immediate and permanent benefit reduction of 16% would need to be applied to all current and future beneficiaries.

When it comes to Social Security benefits, everyone should know their Full Retirement Age (FRA).

You can elect to receive your benefit anytime from age 62 to 70. Your FRA, however, is when you're entitled to full or unreduced retirement benefits.

If you start taking benefits sooner than your FRA, your monthly payment will be reduced. If you delay retirement benefits until after your FRA, you will earn a credit (2/3 of 1% per month or 8% a year) in the period beginning with the month you hit your FRA and ending with the month you turn 70.

Everyone born in 1937 or earlier has an FRA of 65. Everyone born in 1960 or later has an FRA of 67. Those born from 1938 to 1959 have FRAs ranging from 65 yrs and 2 months to 66 yrs and 10 months.

Everyone's Social Security benefit is based on their highest 35 years of indexed earnings. If someone retired in 2015 and had maximum earnings every year for the last 35 years, he or she would receive $2,663/month. That amount fluctuates depending on when an individual files — at 62, their FRA, at 70, or somewhere in between.

According to the Employee Benefit Research Institute, 54 percent of American workers have less than $25,000 in retirement savings. When it comes to the elderly, 65 percent derive most of their retirement income from Social Security.

Social Security is designed to "supplement" your retirement, not replace it. If you aren't saving for your retirement with a 401k, Roth IRA, company defined benefit or defined contribution plan, your Social Security benefits may not be enough to live comfortably on.

Our government is $19.6 trillion in debt and, according to the Congressional Budget Office, the debt will surpass $27.3 trillion within the next 10 years.

The numbers are even worse when you consider the unfunded liabilities of Social Security, Medicare, Medicaid, which alone account for 47% of federal spending.

What can our government do to ensure Social Security is financially solvent in the decades ahead?

1) Transition from a paper Social Security card to a plastic card with an embedded chip to prevent fraud.

2) Gradually increase the retirement age for future beneficiaries.

3) Lower the percentage increase for delayed benefits above the Full Retirement Age.

4) For individuals with retirement income exceeding a certain level, return what they paid in employment taxes through their working years and then eliminate their benefits.

Social Security is our nation’s largest social welfare program. Ensuring the program’s long-term viability should be a top priority for every one of our elected officials.

Rosenkranz is a former U.S. Air Force F-16 fighter pilot, combat veteran of the 1991 Gulf War, and author of the book Vipers In The Storm. He can be reached at RoseyF16@gmail.com.


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