Q. Since life expectancy in the United States has dropped with COVID, why then do they say that Social Security is running out of money?
– Not retired yet
A. Thank you for your question.
The answer is complicated.
Life expectancy in the United States increased by 78.8 years in 2019, according to Centers for Disease Control and Prevention (CDC). For 2020, it dropped to 77.0 years, the CDC said. COVID was the third most common cause of death in 2020.
When Social Security was created to pay benefits at age 65, the average life expectancy was 63, said Jerry Lynch, a certified financial planner with JFL Total Wealth Management in Boonton.
The average person should not receive benefits, he said.
“Now the average person would receive benefits for 10 years, and many are living much longer,” he said.
There are several things that have a negative impact on the health of social security, Lynch said.
“With COVID, a lot of people just said ‘I’m out’ and retired earlier than expected over the last two years,” he said. “People are living too long. Baby Boomers are retires during this period and there are many of them. The system is never designed to pay that long. “
There are also fewer younger workers paying into the system, he said.
Then there is the Social Security Trust Fund, which is to be invested in “Special Issue” treasuries. It does not benefit long-term stock market growth, “Lynch said, noting that politicians do not want to touch this” political hot potato. “
Lynch offered several ways the system could be improved, including indexing the full retirement age better than today’s life expectancy and increasing the salary people pay Social Security tax on, which is currently limited to $ 147,000 in income.
They could change the benefit calculation formula from being based on 35 years of work experience to 40 years or more, or reduce increases in the cost of living or reduce benefits for retirees who are at certain income levels.
“The biggest problem here is that all solutions involve pain, that is, either more taxes, reduced benefits, or working longer,” Lynch said. “This is a very important issue that I feel needs to be addressed and small changes will not have a very big impact in the long run.”
The government could step in, but so far “we just kick the can down the street and get our kids to pay for us.” he said.
Mail your questions to [email protected].
Karin Price Mueller writes Confused column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. sign up NJMoneyHelp.com‘s weekly e-newsletter.