By: Virginia Reno and Joni Lavery

Published: February, 2005

Social Security Brief No. 18 ~ February 2005

Summary: Social Security is in excellent financial shape over the next decade; it is running surpluses while the rest of the federal government is running deficits. If the Trustees’ “best estimates” for the next 75 years hold true, Social Security funds will fall short of benefit costs in about 2042. In that year, taxes coming in will be sufficient to pay 73 percent of benefits promised under current law. Many options are possible to ensure that all legislated benefits can be paid. This brief explores a variety of changes that eliminate all or part of the shortfall. Removing the cap on wages subject to Social Security taxes – now $90,000 – would bring in enough new money to eliminate the deficit. Price-indexing the benefit formula would reduce benefits enough to erase the deficit. Many combinations of changes would remedy the projected shortfall for 75 years and beyond. The brief also notes how proposals to create individual Social Security accounts differ from plans to bring about long-term solvency.

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