Actuary Brian Septon studies risk in the healthcare and retirement sectors, but he hadn’t heard of all of the ideas to change Social Security — then he tried to fix it himself.
Septon, principal at The Terry Group, tried his hand at solving the Social Security insolvency issue with a new app from the American Academy of Actuaries, of which he is a member. The Academy created a game-like website to address the issues Social Security is facing, and look at ways possibly to improve it.
Read: One Social Security fix that should be on the table
The two trust funds that support the Social Security system are expected to run out of money by 2035, at which point beneficiaries across the board would receive a 20% cut to their benefits. Congress has never let the system fail, but legislators haven’t yet decided what to do about this problem. The two main talking points are cutting benefits, such as by raising the Full Retirement Age, or increasing taxes. Republican presidential candidate Nikki Haley recently suggested upping the FRA for younger generations, though she didn’t specify to what age or offer more details.
See: Social Security is in trouble — how would you fix it?
In the Academy’s app, users get a chance to look at potential solutions themselves. Their choices are reflected on a meter showing how much of the system’s shortfalls are eliminated. Options include reducing or increasing the cost-of-living adjustment, changing the full retirement age, adding benefits (such as allowing child care to count in the benefits calculations), eliminating the contribution base or applying a tax on earnings above it. The meter changes with each decision, and can be negative — suggesting those choices would cost the program more.
“Every change impacts it,” Septon said. It was important to see that the solutions don’t have to be one or the other, but a “combination of levers,” he added.
Also see: A battle over Social Security is coming in 2023, and some retirees are gearing up for a fight
Legislators have introduced a few proposals in the last few years. Connecticut Democrat Rep. John Larson has pushed for his proposal called the Social Security 2100 Act, which has measures such as changing the inflation index the COLA uses to reflect the expenses of older Americans as well as adding a payroll tax for wages over $400,000. Senators Bernie Sanders, from Vermont, and Elizabeth Warren, from Massachusetts have also put forth a proposal that would include implementing a payroll tax on ordinary income above $250,000 and another tax on investment income for some investors.
“It is very clear Social Security is becoming the forefront of the conversation, especially with the trust fund depletion coming up in the next decade,” said Linda Stone, senior pension fellow at the American Academy of Actuaries. “Our goal here was to educate as wide of an audience as possible.” When people hear politicians or others talking about Social Security in the news, they may understand the impact of their suggestions better after having used this app, she added.
“We are hoping this leads people to action,” Stone said. “This is not a local issue.”
