OK, OK, OK, the Social Security Trust Fund is insolvent.
Or...
it's going to be insolvent...
or maybe not...
but not until 2040.
Enough already! On any given day you can scour the Internet for horror stories of how Social Security "isn't going to be there" when I retire.
And often times, current retirees have the mistaken belief that the benefit will be taken from them.
Let's review the facts:

1. "Full Retirement Age" (when one can claim full benefits) is being slowly increased from age 65 to 67.
   This shift began in 2000, and is happening over a 22 year period.
   
2. Most benefits are subject to income tax.
   
3. High-income earners receive the largestdollar payments, but low income earners receive a larger percentage of their income.
   In other words, low income earners have earned a greater return on their Social Security tax payments than higher earners.
   
4. For most Americans, the Social Security tax is the single largest tax that they pay.
   Currently, it's a flat tax on the first $106,800 of income that you earn.
   
5. Social Security is "funded" by a 12.
   4% tax on earnings (paid half by the employer and half by the employee).
   
6. For years (essentially since the program was incepted in 1937), we have been collecting more than we've paid out.
   So each year, some of that revenue goes to pay benefits and the excess receipts go into the "Social Security Trust Fund.
   "
7. The Trust Fund as basically an account which invests its money in US Treasury bonds.
   
8. Starting in or around 2016, the 12.
   4% current tax revenues will not be enough to pay 100% of current benefits.
   They will need to start using the interest income from the bonds to pay benefits (in addition to current receipts).
   
9. In 2024, benefit costs will exceed Social Security's tax revenues (the 12.
   4%) plus Trust Fund income (the bond interest).
   As a result, the program will need to begin selling some of its investments (the Treasury Bonds) to pay benefits.
   
10. In 2037, all the bonds (the current "surplus") will be gone.
    (The lockbox will be empty...
    ) Social Security will be depleted.
    At that point we will only be able to pay 78 cents on the dollar (using the 12.
    4% tax income each year) and it will become worse as we go.
    

There you go.
The big ticking time-bomb.
So then, one might ask, "what do we do to fix it?" This is where it gets really interesting (if you want to use that term).
And I say "interesting", because, like most major issues in America, politics enters the picture, and common sense is (proverbially speaking) thrown out the window.
There have been plenty of solutions proposed over the years, and as we all witness day after day, politicians banter these ideas back and forth, punting (to use a football analogy) to the next Administration or the forthcoming Congressional delegation.
In reality, like most economic and financial issues, the answer comes down to two simple, yet complex solutions: increase revenues or reduce expenditures.
This budgetary scene is played out every day across the world; inside corporations and small businesses, among non-profit agencies, and within individual households.
A simple mathematical equation...
greater inflows, or smaller outflows.
Sounds easy.
Well, it involves many different moving parts, but to simplify things, here are some of the many options Congress could choose in order to ensure the ongoing funding of our current system: Reduction of Benefits: 1.
Increase the mandatory retirement age even further.
This would essentially delay the collection of benefits for future retirees.
2.
Summarily reduce benefits by a stated percentage, either to future retirees, or current AND future retirees.
3.
Reduce/change/eliminate cost-of-living-adjustments on benefits.
Although increases would need to be made for future retirees, once you are retired, Congress could opt to increase benefits by some number less than the level of inflation (as is current practice).
The current rate of CPI (inflation) and its impact on the retired is also debatable, but that's a story for another time...
4.
Do nothing now, and cut benefits drastically when the Trust Fund is depleted, down to the level of (then current) tax receipts.
Increase Revenues: 1.
Increase the Employee and Employer Payroll Tax (or one, or the other).
2.
Increase the Income threshold that is taxed, which currently stands at the first $106,800 of earnings.
3.
Increase the return on investment in the Trust Fund (essentially, invest in riskier assets).
4.
Transfer the legacy startup shortfall to the general government budget.
What does this mean? The original recipients of Social Security paid little or (virtually) nothing into the system, but began collecting benefits in 1940 (tax receipts began in 1937).
This created in initial shortfall in the system.
In other words, those original recipients did not pay their fair share.
5.
Do nothing today, and raise taxes in 2037.
Obviously, all of these options come with a bit of pain involved.
In my humble opinion, the answer lies somewhere among a mix of the options outlined above...
raise taxes slightly, increase the income threshold slightly, raise retirement age slightly, and reduce benefits slightly.
Any drastic measures would only serve to alienate and financially impact one particular segment of the population.
But the bottom line is that Social Security benefits as we know them, albeit slightly reduced benefits, are here to stay, at least until our government comes up with a better solution (please don't hold your breath).
So the next time you think "I'll never see my benefits", think about these facts.