If you've read a newspaper or visited a news Web site in the past few years, you've heard that Social Security is becoming insolvent. Unless a change is made, in 2037, Social Security won't have enough money to continue to pay the same kind of benefits people are getting today.

What Caused the Problem?

The original purpose of Social Security was to offer a baseline insurance policy for retirees. It would be a "pay as you go" plan with an employed work force providing the money for the Social Security fund to pay benefits for those in retirement.

But along the way demographics changed — life expectancy increased and the ratio of workers to those in retirement started to drop. This shift meant that the money coming in would soon not be enough to support the money going out. Attempting to avert future problems, in 1983, a Social Security Trust Fund was created, with the intention to use excess payroll tax revenue to underwrite the shortfall in future Social Security needs. These funds were to be invested in a way which would enable the fund to grow and protect the system for 75 years.

Instead, a system was created where these additional funds were put into non-negotiable treasury bonds, the equivalent of an IOU from the government. The actual revenues were spent on general government expenses.

In 2017 there will not be enough incoming taxes to pay benefits promised and the IOU's in the trust fund will have to be cashed in. Congress will need to raise that money somehow to pay back its obligations. By 2037 all the trust fund IOU'S will be depleted.

Possible Ways to Fix the Problem

There are generally two ways to deal with a budget deficit. You can lower benefits or raise taxes. With either of these, someone won't be happy, which worries politicians looking to get reelected. There are fears about generational conflicts. Do you put a greater burden on the grandparents — cut benefits — or the grandchildren — raise taxes and possibly cut benefits, as well?

And while a lot of people say that they don't think Social Security will be around to help them when they retire, most of these people aren't following through by saving aggressively for their golden years. In 70 percent of households headed by people 80 and older, Social Security currently provides 70 percent of the income. This shows that the average American worker needs Social Security to be there for them when they retire.

Fixing It Now Vs. Later

Fixing it now is relatively easy compared to waiting. So if it's a problem, and everyone knows that it's a problem, why aren't we fixing it? While the solutions are easy to find, all of them will result in someone either paying more or getting less. 

Take Action

Most Americans and legislators agree that Social Security is in need of significant changes and upgrades. Major talks are underway and to ensure future generations receive some type of Social Security benefit, we ask that you lend your voice to this important cause. The Financial Planning Association® (FPA®) urges you to write your representatives in Washington and encourage them to be part of the Social Security solution and to do their part in ensuring that reform comes quickly.

What if nothing is done to fix the Social Security problem? Use the Social Security Predictor to see how you and others will be impacted if no changes are made.

When constituents unite and communicate their concerns, legislators listen. Write Your Representative and/or Senator, tell them that the longer the Social Security discussion goes on with no resolutions, the more it will negatively impact our children, grandchildren and all those who come after. Social Security is critical to millions of Americans — do your part to help ensure its long-term viability.

Learn More

Federal Government Web sites

• Social Security Administration

Other Organization's Web sites

• American Academy of Actuaries
• Center for Retirement Research at Boston College
• The Concord Coalition
• The National Academy of Social Insurance
• Peter G. Peterson Foundation
• Urban Institute