A slow-moving crisis is approaching for Social Security, threatening to undermine a central pillar in the retirement of tens of millions of Americans.
Next year, for the first time since 1982, the program must start drawing down its assets in order to pay retirees all of the benefits they have been promised, according to the latest government projections.
Unless a political solution is reached, Social Security’s trust funds are expected to be depleted within about 15 years. Then, something that has been unimaginable for decades would be required under current law: Benefit checks for retirees would be cut by about 20% across the board.
“Old people not getting the Social Security checks they have been promised? That has been unthinkable in America — and I don’t think it will really happen in the end this time, because it’s just too horrible,” said Alicia Munnell, director of the Center for Retirement Research at Boston College. “But action has to be taken to prevent it.”
While the issue is certain to be politically contentious, it is barely being talked about in Washington and at 2020 campaign events. The last time Social Security faced a crisis of this kind, in the early 1980s, a high-level bipartisan effort was needed to keep retirees’ checks whole. Since that episode, the program has often been called “the third rail of American politics” — an entitlement too dangerous to touch — and it’s possible that another compromise could be reached in the current era.
Benefit cuts would be devastating for about half of retired Americans, who rely on Social Security for most of their retirement income. A survey released in May by the Federal Reserve found that a quarter of working Americans had saved nothing for retirement.
“Fifteen years is really just around the corner for people planning their retirements,” said John B. Shoven, a Stanford economist who is also affiliated with the Hoover Institution and the National Bureau of Economic Research.
“The cuts that are being projected would be terrible for a lot of people,” he said. “This needn’t happen and it shouldn’t happen, but we’ve known about these problems for a long time and they haven’t been solved. They’re getting closer.”