Jason Fichtner, Bipartisan Policy Center Vice President and Chief Economist, joins Yahoo Finance to discuss the Coalition letter calling for creation of interagency task force on retirement security.
JASON FICHTNER: So social security has a trust fund that is currently estimated to be depleted somewhere in the early 2030s. Depending on whether you look at the Congressional Budget Office, the social security trustee's report, or a report that we put out in the Bipartisan Policy Center, sometime in the next 10 years or so, the trust funds will be depleted.
That does not mean social security is going bankrupt. That does mean at that point, they will only be able to pay out in benefits what they collect in payroll taxes, which means beneficiaries at that time will have to take a 20% to 25% reduction in benefits across the board.
So Congress does need to come together, because current law says the social security administration does not have borrowing authority and to cut is automatic. So Congress has to come together, and this takes leadership by the president to actually create some sort of policies and a commission or recommendations that Congress can act upon to make social security solvent. That could be either raise payroll taxes, lower benefits, or some combination of the two.
But we've only got about 10 years to do it, and it's very hard to do things on a bipartisan basis just overnight. As we're seeing with the infrastructure bill going on, it takes time to actually get bipartisan support. So again, we think with social security, and with other issues-- student loan debt and emergency savings-- now is the right time for an interagency task force.
- Now, in the letter, Jason, you know, you guys say that the quote-- I'm going to quote here, that the three-legged retirement stool is shakier more than ever. If you could, just-- just paint a picture right now about what kind of security folks have currently heading into their retirement. How shaky is that stool?
JASON FICHTNER: Well, as a reminder that the three legged stool is your social security, your employer-provided pension, and your own personal savings. Again, we just talked about social security is facing a financial shortfall in the next 10 years.
A lot of defined benefit pension plans no longer exist. Some state and local employees have it, but from the private sector, there has now been a movement towards defined contribution plans. These are your 401(k) plans or your 403(b) plans. Most employees don't have a pension anymore. They have their own sort of defined contribution plan, and they may not have access to a plan.
The third leg of that stool is your own personal savings, and because of COVID and, of course, unequal distribution of income and wealth, a lot of people aren't adequately saved for retirement. Boston College estimates that at least 50% of people might be at risk of not being able to have a comfortable or secure retirement. So it's very shaky, and that three legged stool sometimes--