In late April, Mary Beth Franklin, a nationally known Social Security expert and author came to visit the Akron area. The University of Akron Foundation hosted her at Portage Country Club for an educational session which both Nathan Ollish, CFP®, and myself were able to attend.
Mary Beth gave some historical information about the last time the Social Security programs were updated and changed. This came from the 1983 Greenspan commission which was chaired by Alan Greenspan, long before he was Chairman of the Federal Reserve Bank.
At the time those changes were implemented, largely to ensure that the Social Security system would be solvent for the coming wave of baby boomers, 90% of all wages earned in the country were taxed for Social Security purposes. The hypothesis was that if this level of taxation was maintained, the system would stay solvent long-term. However today, only 83% of the wage base is currently taxed for FICA. The maximum amount of wages that are taxed for Social Security tops out at $132,900 currently. Increasing this to approximately $250,000 and indexing it for inflation would bring that number back in line with the 1983 goal.
The most recent annual Social Security Trustees report was recently released. It continues to show that the Social Security trust fund surplus is projected to deplete by calendar year 2034. It is also projected that once the surplus runs out, Social Security would be able to continue to pay benefits at approximately 77% of its current level just based on current collection of FICA payroll taxes.
We continue to watch the Social Security system with great interest. It is a foundational social safety net that provides a base of income that most people, including our clients, count on to provide for their retirement income needs. There are several levers that could be pulled, in varying degrees, that would make the system solvent and sustainable for many years to come. These include the payroll tax funding level, cost-of-living adjustments, and the age at which you can collect maximum Social Security benefits. We continue to watch and wonder when our Senators and Representatives on Capitol Hill will take this relatively simple-to-solve problem seriously and come up with real solutions.
This is the third time I have had the opportunity to hear Mary Beth Franklin speak about these topics throughout the years. I also regularly read her column in Investment News. She is extraordinarily well versed and an extremely well-respected resource for information on these topics. I am glad that Nathan and I had a chance to hear her latest information and thoughts. We take our continuing education and staying current on relevant topics to our clients extremely seriously. This is part of our commitment to our clients as we continue "Moving Life Forward" together.