Social Security is designed to provide a basic income to everyone who retires. These benefits are financed by a payroll tax, paid by both workers and employers. But it’s projected that in 2020, the cost of paying benefits will exceed Social Security’s tax revenues and trust fund income, and that in 2033, the fund will be depleted.

Analysts say reforms to the system are required to keep it solvent far into the future, with proposals that include raising the age at which people can collect full benefits, cutting benefits and raising taxes. As part of this week’s series on retirement, Here & Now’s Jeremy Hobson talks with Carolyn Colvin, acting commissioner of the Social Security Administration.

• See more in our retirement series
• Find out more about your Social Security earnings and find benefits calculators

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Interview Highlights: Carolyn Colvin

What do you say to financial planners that tell their clients 35 years or younger not to even count on Social Security being there when they retire?

“I say that’s wrong. The program has existed for 80 years, I have no doubt that it will be strong and robust for the next 80 years. Each year we provide projections for the next 75 years, most of those projections have been pretty accurate, and so Congress knows well in advance what the challenges are and they have more than adequate opportunity to fix those, as it always does in the past. You remember the 1983 bipartisan commission that was led by Alan Greenspan. We know that there will have to be some changes, and there have been over 100 policy proposals that have been analyzed and scored by our independent actuary, which indicates what the impact will be on the program, depending upon which of those policies are selected by the administration and by the Congress.”

Are minor changes needed, or is a massive overhaul required?

“I think that will depend upon the debate that Congress and the administration and the American public will have. You know, we’re a bipartisan agency, we don’t take a position here, but certainly we expect that there will need to be some changes to the program.”

Would raising the retirement age make any difference or impact? You yourself still work at the age of 73, despite being able to collect full benefits a few years ago.

“Well, I do collect benefits because I have retired, and then I came back. Many people do choose to work, at least until 70 before they collect their benefits, and they have that option. But I think that the important thing is that the retirement age is one of the proposals that our actuary has analyzed and scored. You can go to our website and find out what that impact would be at. I’m not able to specifically tell you that here.”

Whether wealthy people shouldn’t receive Social Security, or if it’s important for everyone to pay into it and get something back from it

“Well, I think that is the foundation that this program was built on. It is an earned benefit. The worker pays at 6.2 percent and the employer pays in 6.2 percent, so certainly people pay into the system and anticipate that they are going to receive a benefit when they need it. So to suggest that some would pay in and not receive anything, I think would change the entire construct of this program.”

If you were to raise the age for when you can collect Social Security, it may have an adverse effect on the poor, who may not live as long.

“Any change is going to have some winners and some losers. So clearly when you talk about changing the retirement age again, you’re going to have some winners and some losers.”

If you were to set up Social Security today, would you do it in the same way as it was done in the 1930s?

“Absolutely. I think that President Roosevelt recognized that there was going to be a need to ensure that American workers would be able to have insurance when they retired. So I would say the funding of paying into the system with the expectation that you would receive a benefit was the right construct when this program was first developed.”

How much additional savings to you recommend Americans have?

“Well that’s a very good question because Social Security was never intended to be the sole source of one’s income when they retired. We know that the American population has not traditionally saved enough money, and of course the amount that they could save would be dependent on their own individual circumstances, but we would urge everyone to save as much as they possibly can because the life expectancy rate has changed. We have over 40,000 people on our rolls now who are 100 years of age and older. We have 10,000 people turning 65 years of age every single day, so we know that many people will outlive their savings, but Social Security helps, of course, to supplement that. We also know that we are seeing less and less defined pension plans so that Social Security becomes even more important because we’ve always saw it as a three-legged stool. Security, individual savings and then the pension from the job where they were working. The president recognized this and so if he has a myRA program that will allow people to begin to save, making it easy for them to have it deducted from their wages, just to get them in the habit of beginning to save.”

And yet so many people do not save and just retire on Social Security.

“Well yes, and certainly we try to educate them to the importance of saving. We have our various retirement calculators online so they can see the amount of money they expect to receive when they retire. That’s another reason why our earnings statement is so important. We now have the earnings statement online, we urge people to take a look at that every year because their benefit will be dependent upon how much they’ve earned, and we want to make sure that’s accurate, but it’s also for planning purposes, so they can use that earnings statement with their financial advisers who will clearly let them know that Social Security is not going to be adequate for all of their needs when they retire.”

Reacting to longer life expectancies and how that affects retirement planning

“We are excited that people are living longer, that they are healthy. But certainly we become attentive to the fact that more people are going to be on Social Security longer, but that’s the very purpose of putting out a yearly projection of what the impact of those variables will be on the trust funds for a 75-year projection. So we look at all of those. We look at the mortality rates, we look at the birth rates, we know that there are fewer people paying into the Social Security system than there were when we first started this program, and so the variables change over time.”

When do you think the next big overhaul will happen?

“Well, we would hope that it would be very soon. We believe that the sooner a change is made, the less impact we have on people who are receiving the benefits. It will give individuals time to plan, to know what the impact is going to be, and they can adjust their personal planning accordingly. We know that the program is solvent now, until 2022 at least. The retirement program and through the relocations that have occurred, we are not concerned about that and we know that the combined trust fund is solvent until 2034, but we certainly hope that Congress is not going to wait until those dates to make some decisions that would be important to make.”

But it’s so politically difficult for them to do it, isn’t it?

“Well it’s not easy, because as I mentioned you’re going to have winners and losers, but we have every confidence that Congress will make the necessary changes because they have done so in the past. This is a program that is the economic underpinning of financial security in this country. We pay out almost a trillion dollars a year to over 60 million individuals. Can you imagine what would happen if all of a sudden those benefits were discontinued? So we know that Congress will eventually make a bipartisan decision on what to do but it’s very difficult, it’s very complex because interchange is going to result in some winners and some losers.”

Guest

• Carolyn Colvin, acting commissioner of the Social Security Administration.

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