Several years ago, the American Academy of Actuaries created a Social Security Challenge tool that allowed taxpayers to explore reform ideas and glean information about their effects — while going through some of the tough choices facing lawmakers and the public.
At the time, Academy experts said the educational tool should be useful to financial advisors as they help their clients learn about Social Security, noting that users can access guided dialogues and interactive modules that help them understand key aspects of Social Security's financial footprint.
Additionally, the tool clarified that Social Security isn't just going to disappear in the 2030s, and it included warnings that delayed action would increase the cost of whatever solution — or more likely solutions — will eventually be put into place.
Now, an updated version of the challenge shows that warning was indeed well-founded. As the tool's interactive module shows, delayed action has made the cost of fixing the program's finances even more dire.
There's still hope, however. As the updated challenge shows, Congress faces many different reform options with complex and wide-ranging impacts — options such as making higher levels of income subject to payroll taxes or raising Social Security's normal retirement age.
"There have also been discussions about much broader structural changes to the entire program," the group notes, such as moving to a flat benefit. "These are not addressed in the challenge."
As before, the financial impacts shown in the challenge assume that Congress is adopting these reforms right now.
"If changes are implemented gradually, the required increases in tax revenue or reductions in benefit will need to be larger than noted in the challenge to achieve actuarial balance," the group warns. "Likewise, the success of reforms depends on how actual future experience compares with the assumptions made by the Social Security Trustees. There is no mechanism in current Social Security law to maintain the program's actuarial balance once it has been achieved. Thus, there is no guarantee that the system's long-term financial challenges can be fully addressed for any specific length of time by enacting various reform options."
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