Social Security is in trouble — how would you fix it?

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Restoring Social Security’s solvency doesn’t have to be all that hard.

That’s important to know, given how intractable Social Security financing reform appears to be on Capitol Hill. But it’s not the lack of relatively painless fixes that makes it seem impossible to overcome Social Security’s actuarial deficit. The culprit is political polarization in Congress.

Notice that I said “relatively” painless. Overcoming Social Security’s shortfall will require either reducing currently-scheduled benefits or increasing the Social Security trust fund’s income, or both. But, I think you will agree, you can package together a number of not-huge modifications that collectively overcome Social Security’s actuarial deficit. (That deficit is the difference in the Social Security’s total income over the next 75 years and the total benefits it would be obligated to pay under current law.)

“The key is to make those changes now rather than wait,” Linda Stone, senior pension fellow at the nonpartisan American Academy of Actuaries, said in an interview. “The longer we put off doing so, the more painful any solution becomes.”

If you had any doubt that there are numerous ways in which Social Security’s solvency can be restored, you should take the “Social Security Challenge”—a new interactive tool created by the Academy. This new app allows you to explore what combination of changes would eliminate Social Security’s deficit. You can choose among more than two dozen specific policy options in nine separate categories. As you choose any given option, the app shows you what percentage of Social Security’s deficit you have eliminated.

Consider the impact of increasing the Social Security payroll tax by 0.05 of a percentage point per year for the next 24 years, with an identical increase to be paid by the employer. That change would gradually increase the employee portion of the Social Security tax rate from its current 6.2% to between 7.0% and 7.5% in 2047. According to the new app, this change alone would eliminate nearly half—44%, to be exact—of the actuarial deficit that Social Security faces over the next 75 years.

To put this tax increase into context, consider what it translates to in dollars and cents. Given that the median worker earns $1,085 per week, according to the Bureau of Labor Statistics, the 0.05% increase in Social Security tax is equivalent to an additional 54 cents per week—or less than $30 per year. And since these calculations focus on the median worker, half would pay even less.

In no way do I intend to minimize the impact of this increase on those who are barely scraping by now. But it‘s also important not to exaggerate the impact of such a change, either.

Another change that would go a long way toward eliminating the Social Security deficit would be to gradually increase the age of retirement. This would represent a continuation of the changes adopted by Congress in 1983, which is the last time that changes to Social Security’s finances were enacted. Consider what would happen if the ages of both early retirement (currently age 62) and full retirement (currently age 67) would increase by three months each year for the next eight years—until those ages were 64 and 69, respectively.

Those changes would eliminate an additional 25% of the actuarial deficit, according to this new app. Together with the gradual increase in the Social Security tax, these two changes would eliminate 69% of the Social Security financing shortfall between now and 2098.

You could argue that increasing the age of retirement lives up to the spirit, as opposed to the letter, of the original legislation passed in 1935 that created Social Security. That’s because life expectancy in the U.S. has increased by more than six years since then, according to the American Academy of Actuaries. So Social Security is being asked to pay for more years of retirement than it was originally designed to support.

In discussing the impact of these two changes, I’m not taking a position one way or the other on whether they are the right ones to adopt. My point is to give you an idea behind this new app. That app invites you to pick and choose yourself among the more than two dozen that this app offers. There are myriad different combinations that, together, eliminate the entire actuarial deficit.

Once you arrive at your preferred combination of changes, let your member of Congress know.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at


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