Social Security won’t be there? Please.

Okay, so one of my pet peeves is people repeating stuff that just isn’t true. I don’t mean rumors that I’m sleeping with Jason’s ex-girlfriends. Hell, that sort of thing is perfectly okay. Tell all sorts of rumors, true or not, about me that you want. No, I mean things like you can’t get ticketed for driving too fast in Montana. Stuff that just isn’t true.

One of the ones that I heard last week was that Social Security will be bankrupt before we retire.

Under reasonable assumptions, it’s just not true. What do I mean by reasonable assumptions? Like we leave the laws around it alone. We could always make Social Security into a dishwasher funding law, but I’m assuming we won’t.

Right now, under the Social Security Trustees projections, Social Security is fully funded through 2041. Under the Congressional Budget Office projections, it’s fully funded through 2046. What does that mean? It means that all planned benefits can be fully paid. Benefits go up faster than inflation, actually. That’s important for what happens after 2041 (or 2046, under slightly more optimistic projections). At that point, benefits can be paid out at 75% of what’s currently planned for those years. 75% of plan at that point is better than if current benefits were indexed to inflation. In other words, retirees after 2041 will be collecting more money, adjusted for inflation, than current beneficiaries.

That’s with no changes whatsoever.

Let’s also point out how far out that actually is. 2041. I will turn 65 in 2035. I will be 71 when Social Security goes bankrupt. 33 years from now. Social Security was in worse shape in 1986 than it will be in 2041, and with a decent change was fixed. 22 years ago. It’s had a surplus since then and we won’t even be dipping into the surplus for another 20 years or so.

This point is so far in the future that if we make really minor changes to the funding (I know, my assumption was no changes, we’re moving on to another part of the argument), like lifting the cap on wage income that is subject to the tax, it will be fully funded forever. Right now if I made 150,000 a year, only the first 90,000 or so would be subject to F.I.C.A. (the tax used to fund Social Security). Poor people pay a higher percentage of income for F.I.C.A. than rich people do.

However, if the economy does as well as it did in the 1970s and 1980s, no changes will be needed. We don’t even need to assume that the economy will be as good as the Clinton years. The economic assumptions in the Social Security Trustees projections assume we won’t do as well as the 1970s. They are extremely conservative (not in the political party sense) assumptions.

To sum up: don’t panic.