In recent years, there has been an ongoing battle among politicians about the state of Social Security. It has been public knowledge for a long time that both trust funds—the disability funds and the old age funds—would be depleted within the next few decades, but recent studies have shown the situation to be worse than initially thought.
For some, however, this was no surprise—and a recent Forbes article presented an important study that showed just how off the predictions could be. Shuffling of funds between the two sides of Social Security has long been the go-to answer for quick fixes, but new information shows that this may not work much longer.
The funding crisis has become a slippery slope of issues lately. The standard answer is to fund the ever-increasing disability needs with funds from the retirement funds—but as our population ages, more and more people are drawing from their Social Security retirement funds, often as a sole source of retirement income.
Innovative Solutions Will Be Needed
These individuals are living longer, healthier lives, and drawing far more from the system than anyone could have predicted. Add on a significant overestimate of the birth rate for the generation intended to fund the massive baby boomer retirement, and the forecast gets considerably grimmer.
While heated political debate over the fate of Social Security disability should be a good thing, as it is certainly an issue sorely in need of debate, it has also contributed to the need to shield the actuaries in charge of the funds from political pressure. While this keeps decisions and planning unbiased, the researchers behind this latest study show that this also shields actuaries from important data developments that could lead to more accurate predictions and more reliable solutions.
The Social Security Advisory Board’s Technical Panel on Assumptions and Methods, a panel that meets every four years and is currently in session, has previously suggested several ways to improve forecasting. It will be interesting to see what, if any, suggestions are made after this meeting.
So what should the solution be for actually repairing and restoring Social Security funds? It’s still up in the air. The Social Security disability fund is set to be depleted by 2016, and politicians are scrambling to offer solutions beyond another transfer from the old age/retirement funds. With the upcoming presidential elections, expect to see Social Security at the front of discussions for each candidate—and hopefully, we will see a candidate offer a lasting, smart solution.