Potential Directions For Social Security

By Wade Pfau

A common argument for claiming Social Security early is that the program is about to be dramatically overhauled in a way that leaves retirees attempting to get a little out of the system before it’s gone. But it seems rather unlikely that any impending reforms would leave near retirees with significant reductions to benefits.
The widespread belief that Social Security is bankrupt and about to disappear has existed for a long time. I can remember walking around Washington, D.C., in the late 1990s and receiving literature suggesting that there were more Americans who believed UFOs visit us on earth than who believed Social Security will be there when they retire.
I commonly hear from individuals that they will plan for retirement assuming there will be no Social Security, and any benefits they do get will be icing on the cake. While I generally support conservative assumptions for planning purposes, I think this viewpoint is taking things way too far. For my own personal planning, my conservative planning assumption is that I will receive 70% of my presently-legislated projected benefits.
While Social Security definitely has funding problems, the situation is not quite so dire as to think it will disappear entirely or otherwise be converted into a pure welfare program. The general goal of reforming Social Security is to help place the Trust Funds into 75-year actuarial balance.
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