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One solution for SSD's problems

Social Security's programs all face challenges. The retirement program is massive and has been expected to run a financial shortfall by sometime in the 2030s for decades. The payroll tax, which appears as the FICA withholding item on your paycheck, funds both the retirement program and the disability program.

Social Security Disability too, has been dealing with the prospect of having insufficient funds available to pay all of its current obligations. Last year, Congress cobbled together a last-minute reallocation of the FICA tax to temporarily avert a very significant cut to SSD benefits, that may have occurred as early as this year.

The SSD trust fund is expected to be exhausted within the next year or two. This occurred because Congress has refused to permanently alter the funding set-up that was last significantly modified back in the 1980s.

The "solutions" that are often offered, typically involve variations on cutting benefits. Whether using a weaker CPI for the cost of living increases or raising the retirement age, these solutions either directly reduce benefit payments or defer payment of benefits altogether.

Sometimes the solutions cause their own problems. The interaction of these programs and their size make any change difficult.

The increase to 66 or 67 in the full retirement age is one reason why SSD's obligations have grown over the last decade or so.  In the 1990s, an individual who was on SSD would likely have retired at age 65 and been moved to the retirement program. Today, because their retirement age may be 66, SSD will have one additional year of benefit payments on its books.

Recent reports have also indicated that because of lower life expectancy for those who work in many lower income jobs, that change has made the system less progressive and more unfair. The only real solution to all of these issues is changing the funding mechanism to ensure sufficient revenue to adequately support these programs.

Source:, " Reason Raising the Social Security Retirement Age Is a Terrible Idea," Rebecca Vallas, Jackie Odum, Rachel West, May 23, 2016

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