Social Security is now paying out more than it takes in. This was not supposed to happen until 2017 (when I last read about it) but due to the recession, etc., is is now happening. On its own, Social Security fund will be depleted around 2037. By the way, that date has been used for years, along with the 2017 date, suggesting that the "2037" is also bogus, and that the fund, without infusions, will run out sooner.
It is generally agreed that folks currently on social security will not be affected by any changes in social security to help "save" it.
The question is who will be affected by social security changes if Congress changes the benefits (obviously if Congress does not change benefits, everyone will be affected because taxes will be used to shore up social security payouts).
If Congress has the courage to act, it will do the easy things first: annual cost-of-living increases will be scaled back; if nothing else, Congress will figure out a different way to calculate inflation and cost-of-living increases.
Congress will not change benefits to those currently drawing social security (that would be political suicide) but "how close" do they get. Within one year of drawing social security? Within five years? Within ten years? The argument will come down to this: any changes must allow folks to prepare for those changes, and at least five years would be needed for folks to decide whether to add more to their own retirement account, continue working, or go back to school to get back into work force. So, I think within five years of drawing social security at 62. Those currently 57 years old or so should be "safe."
Next on the table will be "means testing." Just like "income tax breaks for the wealthy" which had a threshold of $250,000 annual income, means testing will affect those at a similar threshold prior to retirement or assets commensurate with someone at that income level.
The age at which folks can start drawing social security will probably be moved up just a bit; from 62 to 63 is probably politically manageable. And even to 65 might be okay. And if they can't raise the "62 year" threshold, they can make it more punitive when taking social security early. Perhaps the easiest thing to do in this area would be to require means testing for early withdrawal (at age 62).
I'm guessing that the current Congress won't touch the issue. The Republicans are looking at retaking the Senate and the presidency in 2012 and aren't going to risk it. It goes without argument that the Democrats won't touch it this time around.
Double dipping? One can argue that anyone drawing a federal government pension worth more than a certain amount should not be eligible for social security.
So, the soonest they act on this is 2012. They will rationalize the delay by saying that the reason for the current "social security deficit" is the current recession and once the US gets going again, and the unemployment rate is back down to historical levels, social security will again take in a bit more than it will pay out.
The good news for those "close" to drawing social security is that the politicians have telegraphed they won't change benefits for those already drawing social security. Those who are 62 years or older and holding off on drawing social security until they are 67 or 69 years old might consider drawing it one day before a new law goes into effect. (Sort of like playing "The Price is Right" when the winning bidder often bid one dollar more than the competitors.)
The irony is that it would be better for the government to encourage folks to wait.
