He also points out that since current contributions are paying for retirees’ existing benefi ts, diverting money to private accounts would decrease the available funds in the shortterm.

Is reducing benefi s fair?

Another possible solution to the social security shortfall would be to reduce the benefi ts paid to retired people. Benefi t payments are presently determined based on wage levels. Some lawmakers advocate that benefi ts should be calculated based on the consumer price index instead.

“Wages tend to grow faster than consumer prices, so [this proposed reform] would reduce the projected defi cit rather quickly,” Ochsenschlager says. “If we want people to be whole, in terms of what their social security benefi ts will permit them to buy, then doesn’t it make sense to base it on the consumer price index?”

Irwin says the AARP considers changing the benefi t calculation formula to be a more feasible alternative than privatization. “Th at is an option to address the long-term solvency of social security,” he says.

Is raising taxes the answer?

Instead of decreasing benefi ts, the government could consider increasing payroll taxes to fund the social security shortfall. Th is option is unpopular among the general public, specifi cally with conservatives who say higher taxes adversely impact economic productivity.

Th e current payroll tax rate of 12.4% would need to be increased to 14.3% to cover the gap, according to the AICPA.

“Higher-income individuals would be taking a hit in that they’d still be paying in the same amount, but would be receiving less of a benefi t as compared to lower-income people,” Ochsenschlager says.

Security in the midst of uncertainty

Social security benefi ts should not be counted on as the sole source of retirement income—the system was never designed to completely cover recipients’ living expenses.

“Quite honestly, social security—no matter what happens—even if there are no changes, even if you privatized and got the maximum return you could possibly expect, the numbers would not provide you with a lifestyle you would really aspire to,” Ochsenschlager says.

Planning for a secure retirement is difficult, especially as health care costs continue to increase. That’s why people who live at Sedgebrook appreciate the monthly service package, which includes the cost of their home and all maintenance, as well as one meal each day.

“It helps them because they no longer have the worries of repairs, maintenance, taxes, and utilities,” says Tracy Dellaria, Sedgebrook’s retirement counselor. “Their monthly service package incorporates these services for them; therefore, they don’t have fluctuating monthly costs as they would if they were in their own homes.”

And Sedgebrook residents have the peace of mind of knowing that they will always have the full complement of services provided by Erickson HealthSM.

The debate continues

Barring the passage of a bill enacting one of these reforms, the federal government could be forced to fund social security from other revenue sources, such as the general treasury fund. An infusion of $3.54 trillion would be required to continue social security at present benefit levels, according to the AICPA.

Effective reform of the country’s social security system will likely take many years of continued discussion—a conversation that is sure to heat up as the 2008 presidential campaign progresses.

None of the reforms being considered would impact people currently receiving benefits or those over 55 who will begin receiving benefits in the next decade, according to the Social Security Administration.

The future is less certain for younger people, who have been paying into the system but may not receive the benefits they thought they would. 

“Younger people are going to start voting with their feet on this thing,” Ochsenschlager predicts.