Social Security: Legislation, Funding, and Future Predictions

I recently attended an interesting webinar for financial professionals about Social Security sponsored by The American College of Financial Services. Below are seven key take-aways:

Social Security Fairness Act- The number of SSFA affected individuals was about 3.2 million people (myself included). I previously heard 2.8 million and 3 million so this was a slight increase but still roughly 3.1% of all Social Security beneficiaries who had benefits reduced or eliminated as a result of the Windfall Elimination Provision (WEP) or Government Pension Offset (GPO).

Affected Individuals- The WEP affected people who worked for state/local governments in non-Social Security covered employment but who also qualified (40 quarters) to earn Social Security benefits. Think teachers, firefighters, and police (in some states) and others with jobs that did not pay into Social Security. The GPO primarily affected those receiving spousal or survivor benefits.

Loss Aversion Impact- The speakers noted that many Social Security recipients affected by the WEP and GPO felt wronged that their earned benefits were taken away, especially those who requested Social Security benefit estimates. They were anchored on full benefit amounts and felt the cuts from the WEP and GPO as a loss. The Social Security Administration had warned about WEP and GPO benefit cuts but did not say by how much, leading to very strong emotional responses.

New Fairness Issues- The speakers noted that a combination of covered and uncovered jobs may beat out (i.e., result in a higher payout than) having two covered jobs and, for married couples, uncovered and covered spouses may beat out two covered spouses. This math is currently not widely known, prompting a speaker to note “it will be interesting when the public recognizes this.”

Trust Fund Depletion- The SSFA moved up the timeline for trust fund depletion by six months. If proposed new laws eliminate taxes on Social Security benefits and/or taxes on tips, the trust fund depletion date will be even sooner. By law, Social Security can only pay out in benefits what it collects in revenue. It cannot borrow money. Current estimates are that Social Security benefits would need to be cut by almost 20% if Congress does nothing to shore up the program’s stability.

Consumer Concerns- Social Security beneficiaries are understandably concerned about cuts to Social Security’s almost 1,230 local field offices and 10 regional offices. Financial advisors on the webinar were advised to help their clients plan around delays. Staff reductions will lead to longer waits to get questions answered and benefit claims processed. 

Social Security Sustainability- Various potential “fixes” to shore up Social Security were discussed. They include mandatory Social Security participation by all workers, an increase in the Social Security tax (e.g., from 12.4% to 14.4% of gross income), decreased benefits for high earners, slowly raising retirement age (e.g., from 67 to 68 or 69), and increasing the wage cap ($176,100 in 2025).

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.