Is Social Security in Bigger Trouble Than You Think?

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How to Get More Social Security When You Retire

By Karla Bowsher

More bad news about Social Security: The funds will run out sooner than government projections indicate, according to a new analysis.

In an article titled "Systemic Bias and Nontransparency in U.S. Social Security Administration Forecasts," academics from Harvard University in Cambridge, Massachusetts, and Dartmouth College in Hanover, New Hampshire, argue that the federal agency is underestimating the likely future shortfall of its funds.

The Social Security Administration says that to keep the program going, the agency expects to start tapping its reserve in 2019 and expects to deplete its reserve in 2033. According to an SSA summary of the 2014 annual reports:

Thereafter, tax income would be sufficient to pay about three-quarters of scheduled benefits through the end of the projection period in 2088.

That could be a big problem, considering that a recent Gallup poll shows that 36 percent of people who have yet to retire expect Social Security benefits to be a "major source" of retirement income. (See "Social Insecurity: 3 Reasons Retiring Might Be Tough.")

If the shortfall arrives "sooner than anticipated," as the academics project, it could make matters worse. They state that the SSA's Office of the Chief Actuary:
  • Underestimates life expectancy, especially for males.
  • Overestimates birth rates.
In other words, the academics project that retirees will live longer -- and fewer replacement workers will be born -- than the SSA projects. Both of these scenarios would deplete the SSA's reserve sooner than the agency predicts.

But Steve Vernon, a consulting research scholar at Stanford University's Center on Longevity in Stanford, California, writes at CBS News that he is puzzled by the fuss over how the SSA computes its shortfall projections:

This debate is much like arguing whether the Titanic is one mile or two away from the deadly iceberg. Whether the Social Security trust fund will be depleted in 2033, as forecast by the Office of the Actuary, or at some earlier date ... we still have a major problem in need of attention.

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