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Is Social Security at Risk? History, Solvency Timeline, and Policy Options
In episode two of “Creating a Better Life for Seniors,” Mike Roth and Bill Kadereit discuss whether Social Security is at risk, reviewing its origins in 1935, later additions including Medicare/Medicaid in 1965, and major changes such as the 1983 increase of full retirement age from 65 to 67. They link today’s funding challenge to slowing U.S. population growth, lower fertility/immigration, and a rising over-65 population, along with a declining worker-to-beneficiary ratio (from 5:1 in 1960 to 2.9:1 today). Citing trustee projections, they say the Old-Age and Survivors Trust can pay full benefits until late 2032, after which benefits may be reduced about 22% without action. They outline causes including boomers’ retirement, tax and benefit law changes in 2025, inequality under the $184,500 payroll cap, and discuss options: raising retirement age, increasing payroll taxes, eliminating/raising the wage cap, and means testing; they oppose raising the age and support eliminating the wage cap.
00:00 Podcast kickoff 00:36 Social Security origins 01:45 Funding can kicked 02:17 Population growth slowdown 03:39 Aging boomers pressure 05:00 Trust fund cliff 2032 07:07 Why insolvency happens 09:55 Congress options to fix 10:53 NRLN policy positions 13:12 Wrap up and next episode
Mike Roth ai7:
This is Mike Roth and Bill Kadereit Bill and I are here on the podcast called Creating a Better Life for Seniors. And this is the second episode. In a hopefully long series, and today we're going to be answering the question, is your social security at risk and perhaps what you could do or what should be done to reduce the risk? Social security Bill has been around for a long time and. It's a hard subject for a lot of people to grasp because it started back in what, 1935. Wanted to tell our listeners a little bit about the history of Social Security Bill.
Bill Kadereit:
Sure. As you said, Mike 1935 was the creation year, the year the Social Security Act was created. And it was a post-depression economic crisis, an era that the country was coming out of, the need to build production, the need to, create a hand up for people who truly needed help was later tested by the Korean War and Rollercoaster economy. And so there were a lot of events that events led to, even in 1965, creation of the second act, the Medicare and the Medicaid Act, which was appended to the Social Security Act, and that then again, it was modified in 1972 to create HMOs and those contracts. The core purpose was, enacted to pre a protection system, not a dual welfare system funding. It is a political and moral obligation. These are mandatory programs.
Mike Roth ai7:
Now it seems like for the past 20 years our politicians have. Kicked the can down the road in terms of funding social security and Medicare. What, what's really happened?
Bill Kadereit:
The first major cutback to medic social Security was in 1983 where Congress increased the retirement age from 65 to 67. You can collect money at age 62, but with a reduced benefit.
Mike Roth ai7:
Bill, what happened over time and how did we get here?
Bill Kadereit:
Okay. I think to get to that question, we have to first look at our US population and how it has grown and
Mike Roth ai7:
let's take a look at that chart now.
Bill Kadereit:
Sure. As you can see from the chart from 2025 to 2050 the growth rate is plummeting. And below 2% from 2025 outward.
Mike Roth ai7:
So
Bill Kadereit:
that means that the birth rate and the fertil that is the fertility rate and immigration are major factors in that change.
Mike Roth ai7:
So the percent change we're talking about is the orange line and that is projected to get down to as low as 1.4%
Bill Kadereit:
by 2050.
Mike Roth ai7:
And right now we are below,
Bill Kadereit:
below two,
Mike Roth ai7:
below 1.5%.
Bill Kadereit:
Yeah, it's true. I characterize that whole curve. The whole orange curve is below 2% across all those years. It's never as high as 2% if you can see the scale on the right.
Mike Roth ai7:
That's a pretty serious reduction in the number of people paying into Social security.
Bill Kadereit:
It is, and it's, and the growth rate is a significantly smaller change each year. If you notice that change from 2025 to 2050, 25 years later is just 41 million people and over 10 years it barely replaces losses to our population.
Mike Roth ai7:
What about congress? What have they done for us?
Bill Kadereit:
Nothing in a word, nothing. They blame baby boomers and kicked the can down the road. Mike, , this chart shows you that by 2050 there will be 89 million people over the age of 65. That's 26 million or 41% more than the 63 million in 2035, and by two 60. No one will ever remember what a baby boomer was. If you consider all of that impact on the effect on social security, what you're basically doing is you're eliminating these people over time. Even though everyone talks about baby boomers being a big problem, they effectively are gonna be leaving the universe at the same time. The total number of people in Medicare, the blue lines. Now the baby boomers, of course, are in orange. The blue line shows that the growth in total medic social Security and Medicare both are growing at a rapid rate. And this is the over 65 group that is growing. 23% from 2000. And on the far left, that 2010 where those two lines cross is where all the baby boomers are in the. Over age 65 group in Medicare or in and in social security. So there's the pressure that is exists in terms of the effect of baby boomers on the social security plan. But the trustee reports have shown exactly what's happened over time. And that information is documented very well. You can see the old age survivor in annuity trust, will fund only the old age and Survivor's Annuity Trust will only be able to pay 100% of benefits until the fourth quarter of 2032. That is the blue line on this chart, and you can see that it was well funded over. 400% that is the Social Security Reserve. As long as 15 years ago or 20 years ago in 2010. Congress has known before that time because they get these reports every 10 years. They get these projections on the budget every 10 years. They knew the problem was coming and did nothing. The trend in the band was, like I said, today it's over 200% lower than the 400%, and by 2032, it will be zero unless some action is taken. And so that's the essence of our discussion today. What do we think has caused that and what what can we do about it? We've already addressed primary cause, which was reduce the reduction in the number of people contributing. Because of the slow growth in total . So the good news is the disability side of it is OK and the others in Social Security are in trouble.
Mike Roth ai7:
So the green line is the money set aside for disability, that never goes to zero. But in 2031 or 32, it looks like both social security and. The money set aside for medical payments goes essentially to zero. What happens then?
Bill Kadereit:
What happens then is the they will have to reduce benefits by 22%. And at that point, the 78% of benefits that will be paid to everyone will have to come directly from. Money taxed as it comes in the door. It's gonna be going out the door. There will be no reserve.
Mike Roth ai7:
Operating the fund without a reserve seems to be a terrible mistake.
Bill Kadereit:
Yeah.
Mike Roth ai7:
For our children and our grandchildren
Bill Kadereit:
So there are six primary reasons why this has happened. The re mass retirement of baby boomers. The last boomers will hit 65 by the end of 2027 shrinking worker to beneficiary ratios. In 1960 , there were five workers for every one beneficiary. Today, there are only 2.9 people for every one beneficiary, so that's not a good ratio. Recent tax law changes for example, the One Big beautiful Act Of July of 2025, increased payments. From taxing of benefits, accelerating the solvency, the insolvency of Medicare. Now that's not a bad thing necessarily because it did correct the wrong. And what happens now though is Congress has an obligation, a mandatory obligation to put the money back into in the till. And that's the real issue that's on the table. The Social Security Fairness Act passed in 2025. Made good on people. Who were owed $196 million, 33.2 million public workers in the sectors. That issue was all about, for example, Mike, when you were younger and I was younger, if we moved from city to city and our wives were working and the kids and they were working the little part time, and, they had some income and so they had social security credits built up. But if they moved to Texas, as my daughter did, for example and decided to go back to school and become a teacher, she taught for 26 years. At the end of 26 years, they said, here's your pension from the state of Texas for teaching. And oh, by the way, if you take your social security money, we deduct that from your pension. And she said, what? And I said, yeah I found out about that and I said, it's crazy,
Mike Roth ai7:
Right?
Bill Kadereit:
You earn those credits, you earn those credits, you get paid those credits. But Congress passed a law years ago that set that up so that there are 16 states that are taking advantage of federal statute that allows them to do that. And they got rid of it finally at 2025. So they took that step, but that cost another $996 billion out of the treasury, out of the, the reserve to get the job done. So that, that has an impact rising economic inequality. The payroll earning tax is capped at one hundred eighty four thousand five hundred dollars as of 2026, meaning that high wage earners grow faster, meaning a shrinking share of national income is subject to that tax. So therefore, that that cap of $184,000. Needs to be reviewed, and we have a proposal on that. Lower fertility and immigration, as we just discussed in the prior slide talks about the smaller future workforce will be there to pay for the system.
Mike Roth ai7:
Bill, what options does Congress have now to prevent cuts in our payments?
Bill Kadereit:
The first option is they need to act sooner rather than later. But the most discussed options are raise the full retirement age, pushing the age from a 67 up to 70.
Mike Roth ai7:
That's
Bill Kadereit:
optional. The second is raising the payroll tax, increasing the current 6.2% per the employer, and 6.2% for employees. Combined rate of 12.4% lifting. Or eliminating with a wage cap, the taxable earnings above$184,500 and means testing, which is reducing or eliminating payments for wealthy retirees.
Mike Roth ai7:
I like increasing the wage cap to some number, like $3 million.
Bill Kadereit:
That would be you should take care of most of the problems but to take care of all the problems, you eliminate the cap and they've calculated the savings. And I think that in a few minutes we'll be able to talk about that.
Mike Roth ai7:
And Bill the NRL N'S position what are your positions on each one of these options?
Bill Kadereit:
Yeah, I think number one, we certainly opposed raising the retirement age. It diminishes life benefits and older workers face discrimination and physical limitations. Waiting until 70 is just too long.
Mike Roth ai7:
Okay, number two,
Bill Kadereit:
we support eliminating the wage cap. Absolutely. Take it off and not the 3 million, but. As far as it goes.
Mike Roth ai7:
So some of em makes a hundred million a year.
Bill Kadereit:
Exactly. They pay the same as every. Anyone making $50,000 a year as a percent of their income? Not dollars.
Mike Roth ai7:
Okay. Yeah.
Bill Kadereit:
Okay. The chief actuary calculated that eliminating$184,500 cap would close 70% of the shortfall. And extend the fund to 2060, not to 2075, but 2060.
Mike Roth ai7:
That's reasonable. That's another 35 years. It's
Bill Kadereit:
a big chunk. Yeah. Yeah. It's a helpful chunk.
Mike Roth ai7:
Okay.
Bill Kadereit:
This should be temporary. We are saying that we these, these changes should be temporary until once adjusted to the 75 year funding rule, and then the taxes should come down, which is a unique. Thing to present to Congress.'cause they've never taken anything down that they've taken up. You and I do all the time.
Mike Roth ai7:
Yeah.
Bill Kadereit:
We got a little savings. We got something to spend and we don't have savings we can't do
Mike Roth ai7:
Right.
Bill Kadereit:
We gotta put some back in the till. So we support raising the 6.2%.
Mike Roth ai7:
Okay.
Bill Kadereit:
If necessary. But it may not be necessary.
Mike Roth ai7:
Okay.
Bill Kadereit:
And we have no position on, on, on means testing because. It's such a critical issue. There's the argument about the social security is earned and not a welfare program and then there's also the argument that taxing assets should be off limits and means testing should discourage. Personally, I come down on, if you make a private investment or you capitalize a company or you go out and you make a bet in the stock market and you benefit from that, that should not apply here because those are not wages. Those are, you are putting your own money, your own equity at risk to earn additional money, and that should not be taxed as a payroll tax.
Mike Roth ai7:
Be included.
Bill Kadereit:
Okay.
Mike Roth ai7:
What about earnings from gambling?
Bill Kadereit:
They are taxable.
Mike Roth ai7:
I know that.
Bill Kadereit:
So her loss is deductible.
Mike Roth ai7:
Harder to prove both.
Bill Kadereit:
Yes.
Mike Roth ai7:
Okay. So I guess we've reached the end of this fact filled episode.
Bill Kadereit:
Yeah. And I want everybody to watch for our next video. It has to, we're gonna shift gears a little bit. We're going now to talk about pension plans. And then from there on we'll be talking about other issues. Of course, all the economics that we've talked about so far apply and it, and when you're reading and you're listening to video or the, just getting the audio version remember, check back to the prior versions of our presentations
Mike Roth ai7:
they, I think people should go out to the N R L N website. And read the website
Bill Kadereit:
absolutely. NRLNmessage@msn.com is our email address,
Mike Roth ai7:
Bill, why don't you give our listeners, our seniors an email address where they can send you a message if they have a question or a comment?
Bill Kadereit:
Sure. Mike. They can reach us at NRLNmessage@msn.com. Great. Mike you know what we're all about is creating a better life for seniors and I would wish all of them are seniors out there. Best of luck. And so until the next time, remember, seniors are special.
