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March 28, 2023 at 04:58 PM
What You Need to Know
- The general public lacks an understanding of how different proposals to reform Social Security would interact.
- Because of this, the American Academy of Actuaries has launched an educational tool that would allow users to explore reform ideas.
- The new tool should be useful to financial advisors as they help their clients learn about Social Security, says a pension actuary.
Social Security’s trust fund reserves are projected to become depleted in the 2030s, potentially leading to a forced and sizable cut in payable benefits unless legislative changes are adopted.
This basic point is well understood by the general public, according to the leadership of the American Academy of Actuaries, but there is much less understanding of the myriad approaches that have been proposed by lawmakers to fill the Social Security funding gap.
Even more elusive, according to Linda Stone, the academy’s chief public policy liaison for pensions, retirement and Social Security, is an accurate understanding of the way the different proposals to reform Social Security would interact — both from a benefits adequacy and a program funding perspective.
As Stone explained on a recent conference call with reporters, Congress will need to evaluate very different reform options with complex and wide-ranging effects. Options include making higher levels of income subject to the portion of payroll taxes dedicated to Social Security or raising Social Security’s normal retirement age.
Other proposals involve revisiting spousal and survivor benefits to ensure they help retirees stay out of poverty. All in all, it can be hard for even the financially savvy to understand the different options and the impact they would individually and collectively have on the Social Security program.
This is why the Academy has launched the new interactive Social Security Challenge education tool, which allows users to explore reform ideas and glean information about their effects — while going through some of the tough choices facing lawmakers and the public.
During the call, Stone said the new educational tool should be useful to financial advisors as they help their clients learn about Social Security, noting that users can access guided dialogs that help them understand key aspects of Social Security’s financial footprint. For example, the tool clarifies that Social Security isn’t just going to disappear in the 2030s.
