Fear Not Retirees: Social Security Looks To Be Expanded

by: Joe Springer


Social Security will deplete its reserves in less than two decades.

But retirees are a large group of voters that vote in disproportionately high numbers.

With politicians in both parties courting retirees, an expansion of benefits looks to be the more likely outcome than a cut in benefits.

Social Security: The Sky is Still Falling

Fears of underfunded Social Security have been around almost as long as Social Security has. Last Wednesday we got another dose, as the Social Security and Medicare Boards of Trustees released the 2016 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. The report is projecting that Social Security will be unable to meet its payouts starting in 2034:

Social Security's total income is projected to exceed its total cost through 2019, as it has since 1982... After 2019, interest income and redemption of trust fund asset reserves from the General Fund of the Treasury will provide the resources needed to offset Social Security's annual deficits until 2034, when the reserves will be depleted. Thereafter, scheduled tax income is projected to be sufficient to pay about three-quarters of scheduled benefits through the end of the projection period in 2090.

The sky is still falling for Social Security.

Social Trends Point to Expansion

The funds may not be there right now, but that has not stopped politicians from both sides of the aisle from cozying up to the idea of expanding (or saving) Social Security. Retired Americans are a large and important voting group, and they vote in disproportionately high numbers.

After a primary cycle prominently featuring an avowed socialist, the Democrats are now rallying around proposals to expand Social Security and increase benefits. President Obama summed up the Democratic platform at a rally on June 1st:

It's time we finally made Social Security more generous, and increased its benefits so that today's retirees and future generations get the dignified retirement that they've earned. And we could start paying for it by asking the wealthiest Americans to contribute a little bit more.

For the Republicans part, Donald Trump has vowed to save Social Security by targeting fraud and bringing jobs back:

I'm going to save Social Security. You have tremendous waste, fraud and abuse. We have in Social Security thousands of people over 106 years old. You know they don't exist. There's tremendous waste, fraud and abuse, and we're going to get it. But we're not going to hurt the people who have been paying into Social Security their whole life and then all of a sudden they're supposed to get less. We're bringing jobs back.

Cutting Social Security, or even talking about it, is likely a considerable political blunder that politicians from both parties should be eager to avoid well into the future.

Bottom Line for Retirees

Though there will continue to be talk in the media of cutting Social Security to meet funding, the more likely outcome looks like new funding will be found (the US prints its own money after all) and there may even be some degree of expansion of benefits.

Elsewhere in Retirement

Democrats and Republicans are doubling down on appealing to retirees in an election year - Democrat Elizabeth Warren and Republican Steve Daines introduced legislation last week to protect retirement savings for people who change jobs. The bill would create an online "lost and found" for retirement accounts using data that employers already have to report to the Treasury Department. According to Senator Warren:

Our country faces a retirement crisis, and it's important that all workers have a real chance to build retirement security. But today, millions of Americans are losing critical savings when they move between jobs. This bipartisan bill will help protect the retirement savings employees have earned.

As more Americans approach retirement age, the idea of appealing to retirees is getting more and more appealing to politicians of all stripes, and a trend of expanded retirement and Social Security benefits look generally like a better bet than belt-tightening.

For More on Retirement

Check out our newly launched Resolving Retirement letter, where we track our favorite individual stocks.

Please follow us by clicking "follow" next to "Premium Research" at the top of the page under the article's title.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.