Will Social Security change in the future?

Yes, Social Security will continue to change in the future as it has over its nearly 75 year history. Exactly what these changes will be no one knows for certain, but there have been several proposals made to address the need to pay benefits to a growing number of retirees who are expected to live longer than earlier generations.

First, proposals that reduce the growth in future benefits:

1. Change cost of living adjustments (COLA) so that future increases would be somewhere between 0.5% and 1% less than under current law.
2. Change benefit formulas for future retirees to average 40 years of earnings (rather than the current 35 years) or adjust benefit rates in other ways that reduce average benefits.
3. Phase in a higher Full Retirement Age (FRA) of 68 or higher for future retirees.

Finally, proposals that increase future revenues to pay for benefits:

1. Raise the maximum earnings subject to Social Security taxes (currently $106,800) faster than under current law or eliminate the maximum entirely.
2. Increase payroll tax rates for employers and/or employees.
3. Require that all state & local government employees be covered under Social Security(under current law participation by state & local governments is voluntary).
4. Invest Social Security trust funds in marketable securities to potentially increase future income to the fund.
5. Increase taxation of Social Security benefits; currently about 1/3 of all beneficiaries pay some income tax on their benefits.

What will the final plan to refinance Social Security look like? I am sure that it will include at least some of these proposals. There could also be provisions for a voluntary "personal account" that would include an offset of traditional Social Security benefits at retirement if a worker chooses to participate.

When people ask me if Social Security will be there for them I say yes and I really do believe it. But I can't help thinking about the verse from a Joni Mitchell song, "Don't it always seem to go, that you don't know what you've got till it's gone." So boomers, pay attention! We all have a lot to lose.