According to the latest annual report from the Social Security Board of Trustees, the program will begin paying out more in benefits than it collects in revenue by 2022, which is mostly a result of lengthening life expectancies and the ongoing retirement of baby boomers. By 2034, the roughly $3 trillion in asset reserves held by the trust will be completely gone, leading to what the trustees project will be a cut in benefits for existing and future retirees of up to 23%. A combination of raising additional revenue and cutting benefits would be ideal, but compromise is in short supply in Washington. Here are six ways the GOP could, in theory, cut Social Security payments over the course of many years.
- Raise the full retirement age—this could gradually inrease to 68, 69, or even 70
- Switch the inflationary tether to Chained CPI—this would result in smaller annual cost-of-living adjustments
- Means-test for benefits—this would reduce or remove payouts to the wealthy
- Progressively link longevity to benefits—this would increase the FRA, as well as the age at which delayed-retirement credits max out
- Consider a full or partial privatization of the program—a slim possibility, but this would involve returning a percentage of SS tax contributions to an individual to invest as he sees fit
- Freeze the purchasing power of benefits for some, or all, beneficiaries—least likely, this would "freeze" COLAs
Only time will tell if Republicans move forward with one or more of these cost-cutting initiatives. Read the full article on The Motley Fool.