Even as 401k's tanked, home prices plummeted and jobs vanished, more than 50 million Americans went to sleep in the past couple of years assured that at least one of their assets would still be there in the morning: their Social Security checks.
No matter how precipitously the stock market fell, those monthly benefits -- which averaged $1,168 for retired workers -- always turned up.
"Social Security is really the gold standard of retirement benefits," says Nancy Altman, the author of "The Battle for Social Security: From FDR's Vision to Bush's Gamble."
Although it might not have been apparent to recipients, the worst recession since World War II has trimmed Social Security's finances. And as millions more Americans become eligible, future and current beneficiaries are left wondering: Just how safe are my Social Security checks?
Shortfall keeps getting closer
Payroll tax receipts, the program's key source of revenue, have declined considerably during the economic slump, putting a chokehold on Social Security's funding. As a result, the system's break-even date -- when Social Security will begin paying out more in benefits than it takes in through payroll taxes -- has been moved forward by one year, to 2016, in the most recent Social Security trustees report.
What's more, the still-sputtering economy might bump that date forward. The system will make up the shortfall by dipping into its $2.4 trillion trust fund. (The fund, however, is held in government bonds, not cash. Redeeming the securities might require federal tax increases or spending cuts.)
After the trust fund is exhausted -- which, according to projections, would happen in 2037 -- Social Security would be able to pay out only about three-quarters of its promised benefits through 2083.
No crisis -- yet
Although this prognosis may appear alarming, Virginia Reno of the nonpartisan National Academy of Social Insurance insists that Social Security's books aren't cause for panic."There absolutely is no crisis," she says. "There is a shortfall in the long-term finances."
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For a genuine Social Security crisis, Reno points to 1983, when the system's finances were so depleted that benefits would have had to have been reduced or delayed within months had Congress not acted.
Still, it's clear that Social Security's finances need attention, and the longer reform is put off, the more intrusive the repairs that will need to be made down the road.
"If you hear something wrong in your transmission and you fix it immediately, it may be expensive, but it is a heck of a lot cheaper than when gears start to fly out the back of the car," says David John of the Heritage Foundation, a conservative think tank. "We are at the point right now where the gears aren't flying off, but they are getting close."
Perpetual politics
There's nothing simple about reforming Social Security. Neither President George W. Bush nor President Bill Clinton could get it done. That's because Social Security beneficiaries are a large, politically engaged bloc of voters who aren't crazy about the two main avenues for bringing the system into actuarial balance: cutting benefits or raising taxes.With President Barack Obama's administration consumed by the rickety economy and an ambitious domestic agenda, the White House is unlikely to take on Social Security reform anytime soon. But Andrew Biggs, a former deputy commissioner of the Social Security Administration, expects Obama to try to tackle reform at some point.
"It's a big issue, but it's relatively fixable in the sense that it is much more of a mature policy issue than something like health care," says Biggs, a resident scholar at the conservative American Enterprise Institute. "We know the pros and cons. We just have to make our decisions."
Continued: Options for a not-so-quick fix
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