This document discusses reforms to the Social Security program in the United States. It notes that Social Security is projected to run out of funds by 2033 due to increasing life expectancies and fewer workers paying into the system compared to retirees receiving benefits. The document proposes means-testing Social Security by gradually phasing out benefits for high-income earners over $50,000 to help close the program's funding gap and extend its solvency by reducing projected shortfalls by around 75%. This phaseout plan aims to target benefits to those most in need while keeping Social Security funded for future generations.

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Reforming Social Security
Kevin Waida
November 4, 2014
Argument and Advocacy
Social Security continues to be one of the “hot button” issues in the United States. Given
the potential challenges facing both the country and America's high amount of seniors, it's no

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wonder why the program is a topic of debate. According to the nonpartisan Congressional
Budget Office's 2011 long-term budget outlook, the program's assets could be doomed as early
as 2033. Gorin (2012) claims that “fixing Social Security is not an impossible task” (p. 3) and
Presidential candidates have begun touching the sensitive subject hoping to gain some sort of
momentum in the right direction since “Millennials don’t have their collective heads in the sand
on Social Security’s insolvency” (Bass, 2012, p. 23). However, candidates' assertions that the
system requires fixing outnumber concrete ideas about reforming the system. Thus, no proposal
yet has satisfied all the cries for a complete overhaul, while no proposal has been small enough
to fix one issue at a time. This is understandable, as every potential solution seems to carry with
it a heavy economic or political burden. Below are a few of the more talked about options
circling around. All of these options will alter how long individuals will stay in the workforce.
(Congressional Budget Office, 2010, p. 16).
Problems/Ills/Harms
There are a few problems worth addressing in Social Security. One ill is that social
security is going to run out by the year 2036, and as early as 2033 (CBO, 2011). There are too
many people currently receiving benefits from social security (the baby boomers generation) and
not enough people paying into it (Vernon, 2014). Thus more will be withdrawn than put in, and
by 2036, the current system will cease to exist. Social Security has begun to tap into into its
“trust funds”, deep reserves saved for emergencies. Because Social Security was not a pre-
funded idea, it has always relied solely on the contributions of current workers to provide money
for payouts to people receiving benefits. Since the baby boomers, the current generation
receiving benefits, exceed the number of people paying into Social Security, the program is

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slowly draining out. Once the baby boomers suck the reserves dry, there will be no money left to
fund the program.
When proposing a solution we run into the issue that there is not a solution that fits
everyone. If the full retirement age (FRA) is raised, it will force people to work longer. If the
government re-calculates how social security is paid out, it could drastically alter how much
people receive. If the government lowers payouts across the board, it will leave several million
people 65 and older below the poverty line. Another harm society runs into is Social Security
affects everyone. It is not merely an optional payout or a small piece of retirement. People
depend on this and have been paying into it their entire life. The Congressional Budget Office
(2010) reminds us that “53 million people receive social security benefits” (p.1). Many seniors
rely heavily on the program: nearly half of the unmarried people 65 and older get 90 percent of
their income from the Social Security, whose average monthly benefit to an individual retiree as
of 2014 was $1,190.70, which puts the annual total at over $14,000 per person (SSA, 2014).
Furthermore, the Census Bureau reported this week that 13.8 million Americans 65 and older
would be below the poverty threshold if it weren't for income from Social Security (Census
Bureau, 2014). And many of those people are headed for an earlier demise if they fall below that
ugly line since Diamond (2002) suggests that “people with higher earnings are living
increasingly longer” (p. 3). If people suddenly have some of those earnings taken away, their life
expectancy will decrease since they won’t have the means to afford the things they need.
People are also living longer, which means the amount paid out to them over their life
will be more than it was for any generation before them. Since the turn of the 20th century
through 2003, life expectancy has gone from 49 to 77 years for males (Shrestha, 2006). The life
expectancy in the United States has risen every single year since 1967. According to SSA (2014)

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he average currently puts males at 84, while females are expected to survive until age 86. With
life expectancy continuing to rise and the current full retirement age staying the same, people are
receiving more and more money from social security through their lifetime.
Blame
Social Security has only gotten into this position because of the government. Even though
13.8 trillion dollars have been collected through social security taxes, and only 11.3 trillion have
been paid out (SSA, 2013), it is still underfunded. The government drastically altered social
security over the decades because of the the structure they used. Initially, social security was
paid out by money collected from taxes long before the current benefits were paid out. Thus,
even when they were instances where more people were getting benefits than there were people
paying into them, there was a surplus of extra money and there was no funding issue. The
government however, started chipping away at the surplus and used it to fund other projects.
Slowly but surely, the surplus dwindled, and now there are more people receiving benefits than
there are paying in, and there is only a small surplus to help cover the deficiency. Because of the
government, there is now no money to solve the current issue, too much money being drawn out,
or the long term issue, age growth causing increased number of payouts per person. The
governments actions have forced the program to be in a position where a solution can no longer
benefit everyone, as there now needs to be a saving plan or reduction of benefits imposed in
order to correct the massive discrepancy between the amount of money being drawn out and the
amount being paid in, with very little in reserves to fund the discrepancy.
Cure
When proposing a cure to the social security deficit, two things must be addressed. First,
it must address the age issue discussed earlier. Social Security can simply no longer afford to

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ignore the growing life expectancy in this country. Its important to keep in mind that not having
access to Social Security does not prohibit a worker from retiring, it simply means any person in
line to receive social security benefits at their FRA (or earlier should they choose to enact that
option) will have to fund retirement our of their own pocket for a longer period of time. Second,
it must address the lack of need for people who have earned high income throughout their
lifetime.
The solution I propose is that the United States Federal government creates a phaseout
for people who have earned a yearly average salary of $50,000 or higher over the past 10 years
increasing by 10% for every additional $20,000 of earned income. Social security was originally
meant as a supplement to those who did not have enough retirement savings on their own. These
high income earners, however, have made significantly more than the “average person” social
security was designed for. According to the Wall Street Journal (2011), earners of $50,000 are in
the top half and earners of $70,000 or more annually are in the top third of income earners in this
country, while the Center for Economic and Policy Research (2013) points out that those earners
should have been more than able to meet their retirement needs through modest planning and
investing throughout their working lives. This idea is called means-testing. If the U.S. created a
10-90% phaseout (i.e. 10 cents of each dollar of benefits at 10%) starting at 10% at $50,000 and
increasing 10% for every $20,000 dollars of earned income, up to a 90% phase out at $210,000
(See Appendix A). Social Security could save around 75% of the current losses it is undergoing
annually (CEPR, 2013). One of the fundamentals of the current system is that those who pay
more into it over their lifetime receive more out of it when they retire (SSA, 2014). But it’s
mathematically flawed in the sense that those who are paying more money into it are the higher
income earners, who in turn receive more benefits. The problem is that those high income

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earners don’t need Social Security, as they are more than set up for retirement from the money
earned throughout their lifetime. Over the 77 year existence of social security, the program has
paid out an average of $172.2 billion per year. It’s projected that the payments received will fall
short of payouts by 23%, or about 40 billion dollars. The solution generates about 30 billion in
saved SS income. With the idea that the number of people receiving benefits will reduce
(eliminating the problem we currently have), the plan saves approximately 75% of the deficit.
Thus social security would last 4 times as long as it is projected to now. Instead of social security
dying off in 2033, it would be funded until 2090 on the premise that the deficit eliminating social
security has been reduced to a quarter of what it was.
Solvency
This solution would be enacted starting in the year 2015. It is imperative it is
implemented as quickly as possible to prevent the dwindling of trust reserves. The actions
involved would be this being approved by congress, followed by phase outs affecting each
monthly payment starting in January, 2015. This solves all of the stock issues and corrects the
blame. The plan itself saves 30 billion of the projected 40 billion per year loss. By stabilizing the
deficit, the social security trust fund, which currently sits at around $800 billion according to
Steve Vernon (2014), will survive the current crisis of baby boomers drawing out substantially
more than the younger generations are putting in. In addition, once the crisis is over, it will begin
to slowly replenish what was once a $2.5 trillion dollar reserve. This will help pay benefits for
longer life spans, since people are continuing to live longer with each generation (SSA, 2014).
This solves the short term ill and allows social security to continue giving out benefits to those
who need it, while not entirely syphoning every last cent from the reservees. It also allows the
program to generate enough money for the growing life expectancy, solving another ill. Instead

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of that 30 billion in saved payments being a reduction of the deficit, it becomes part of the sum
that can be payed out into that extra year or wo of benefits as people continue to live. Lastly, it
accomplishes the original goal of social security, and solves the ill that Social Security may not
be properly accomplishing its original goal, which is to be a supplement to income for those who
need it.
Costs/Benefits
With this plan comes some costs. First, this plan takes a large amount of Social Security
away from people who have payed the most into the system (SSA, 2014). Not surprisingly,
according to Pew Researcher (2014) , “67% of people believe there should be no benefit
reductions in social security” (p. 25). However, according to the Center for Economic and Policy
Research (2014) estimates that at $50,000 of average earned income per year entering retirement,
an individual can have a fulfilling retirement without their entire benefit from social security
Since Social Security was designed as a supplement to earned income, it makes the most sense to
make that the primary focus when solving this issue, making sure that the available funds are
going to people who could not have a fulfilling retirement without social security. This plan feels
slightly like Social Security is being transformed into a welfare program. However, it is merely a
reallocation of how this money is going to be used to best accomplish the goals of social
security, which remains the most important benefit of all. In addition, the glaring issue of social
security running out of funds in the short term is vanquished, while the long term concern of
growing life expectancy is now funded by the phaseout. Finally it accomplishes the last ill,
which is that it is a solution of best fit, meaning that that while there is no solution that benefits
everyone, this solution best fits the people Social Security needs to affect the most.

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Currently, there is no solution for the funding problems of Social Security. The phaseout
solution makes the most sense, but there will certainly still be a sizable deficit to overcome in
terms of money within the program. The key is not just to make sure future generations can
receive money, but to support the gigantic crop of baby boomers that will be passing through SS
range for the next 20 years.
References
Izzo, Phillip (2011) What percent are you. Wall Street Journal
http://blogs.wsj.com/economics/2011/10/19/what-percent-are-you/ Retrieved
October 18th, 2014
Shrestha, L. B. (2006). Life expectancy in the united states National Council for Science and the

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Environment. Retrieved from
http://search.proquest.com/docview/60006463?accountid=14576
Center for Economic Policy research, Means Testing Social Security. CEPR (2013, June 07)
http://www.cepr.net/index.php/blogs/beat-the-press/fun-with-numbers-means-testing-
social-security Retrieved October 3, 2014
Social Security Administration. (2014, January 1). www.ssa.gov Retrieved October 3, 2014.
U.S. Census (2012) Population and Age data. U.S. Census Bureau
http://www.census.gov/population/age/data/2012.html
Vernon, Steve (2014) Will social security run out of money. Moneywatch
http://www.cbsnews.com/news/will-social-security-run-out-of-money/ Retrieved October
12th, 2014
Mathews, Meril (2011) What happened to the 2.6 trillion trust fund? Forbes
http://www.forbes.com/sites/merrillmatthews/2011/07/13/what-happened-to-the-2-6-
trillion-social-security-trust-fund/ Retrieved October 31st, 2014
Gorin, S. H., & Armstrong, R. (2012). The Truth about Social Security and Medicare. Health &
Social Work, 37(1), 3-7.
Diamond, P. (2002). Social security reform. Oxford, UK New York: Oxford University Press.

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Congressional Budget Office. (2010). Social Security Policy Options (Publication No. 4140).
Washington, DC: U.S. Government Printing Office.
Congressional Budget Office. (2011). Social Security Policy Options (Publication No. 4141).
Washington, DC: U.S. Government Printing Office.
Bass, D. N. (2012). The Millennial Perspective. American Spectator, 45(4), 22-24.
Pew Researcher. (2014). June 12th, 2014 [Political Polarization Survey]. Pew Research Center
Retrieved from http://http://www.people-press.org/2014/06/12/future-of-social-security/
Appendix
A. Projected Phaseout Table
Income
range when
entering
social
security
(In
thousands)
Average
SS benefit
per month
Average
amount
received
per year
Phaseout
amount
Amount of
payment
reduced
per year
# of people
in that
range over
the next
year
money
saved to be
put towards
future
social
security
50-69 1725.25 20,703 10% 2,070.30 441,000** 913M**
70-89 2090 25,080 20% 5,016 238000** 1.2B**
90-109 2340 28,080 30% 8,424 306000** 2.5B**

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110-129 2517.5 30,210 40% 12,084 204000** 2.4B**
130-149 2648 31,776 50% 15,888 170000** 2.7B**
150-169 2730.5 32,766 60% 19,659.60 102000** 2B**
170-189 2770 33,240 70% 23,268 204000** 4.75B**
190-209 2777* 33,324 80% 26,659.20 204000** 5.44B**
210+ 2777* 33,324 90% 29,991.60 272000** 8.16B**
*2777 is current max benefit, All benefits clulated using social security calculator on
socialsecurity.gov **Approximately; according to data by Wall Street Journal and US census
from 2014