Social Security chief: ‘Retirement crisis’ already here

3. Consider working longer and delaying when you claim your Social Security benefit. At the earliest retirement age, 62, the benefit is about 30 percent lower than at full retirement age, now 67 for those born after 1959. The benefit is roughly 25 percent higher if you wait until age 70.

4. Don’t freak out — at least not yet — because Social Security’s reserves are expected to be tapped out by 2034. It will mean reduced benefits, not an end to them. Congress headed off a similar funding crisis in 1983 by boosting taxes and extending retirement ages, which used to be age 65 for full benefits.

—Russell Grantham

A crisis always seems to be looming over the horizon for Social Security, the everyman’s retirement program that President Franklin D. Roosevelt signed into law nearly 81 years ago.

Last month, the agency warned in its annual report card that it will deplete its reserves by 2034, forcing benefits to be cut automatically by 21 percent. The agency currently pays out more than $800 billion a year to about 60 million retired and disabled Americans.

Carolyn Colvin, the 74-year-old Acting Commissioner of Social Security, takes the projections in stride. She was named in 2013 to head the agency until a new commissioner is picked, probably by the next president.

“I think the program is sound. I think the fears are misplaced. Congress has always done what is necessary to ensure (Social Security’s) solvency,” Colvin said during a recent interview in Atlanta.

She was in town to speak at former President Bill Clinton’s Clinton Global Initiative, an annual meeting where leaders in government, business and philanthropy tackle economic and social problems around the globe.

Here is the Atlanta Journal-Constitution’s interview with Colvin, edited for length:

Q: Over the years many people have worried they couldn’t count of Social Security being there when they retire. Were people wrong to have those fears?

A: I think that’s been a concern throughout the history of Social Security. But I think reality has proven that the concerns or fears were misplaced. People pay into the system.

We know that there are going to be demographic shifts. Certainly when Social Security was first implemented we did not expect the (rising) life expectancy that we have today. We have 40,000-plus people on the rolls who are 100 years of age and older. We have about 10,000 people turning age 65 every day. But I think the way in which (Social Security) was structured was to allow for those kinds of changes.

Young people say, ‘I don’t believe its going to be there.’ What I tell them is it’s there for them now. I had a son who died at 34. He had four children. Social Security was there for them as a survivor’s benefit.

So the program is there for people right now, and I think it’s probably the most successful anti-poverty program the country has ever had. Probably 40 percent of the country would be in poverty, were it not for Social Security.

Q: With long-term programs like pensions and Social Security, tiny changes in many factors can have a huge impact on the program’s long-term health. Which are the most important?

A: Well for us it would be birth rates, the mortality rates, the economy. Remember when we had the recession we had significant numbers of people coming out of the job market, so that meant less money going into the trust funds. And many of those people probably did not return to the job market. Immigration has an impact. When people come into the country, they are working. They pay taxes. If the majority of people are in low-paying jobs, they’re paying less into Social Security.

Q: Social Security’s reserves are projected to run out in 2034. If nothing is changed, what happens after that?

A: I like to believe that something will happen, but by law, we can only spend what we have. So if Congress were not to act and make the changes that would make the program fully solvent, then we could not pay the full benefit. The projection would be 79 percent of what the benefit is right now.

But I really want to say that has never happened. We are not in a unique situation. Congress has always acted to ensure that we are able to pay the full amount that is due. The amount that we pay is already modest — $1,350 (the average benefit for retirees) or $1,290 (the average for widows or widowers) a month.

Q: Baby boomers are retiring in huge numbers. Pensions are disappearing at most workplaces. The typical 401(k) account, I’ve read, is around $26,000. Is there a retirement crisis brewing?

A: I think as far we’re concerned, we’re in a retirement crisis right now, particularly with the Baby Boomers retiring. The savings rate is inadequate, and so many of the jobs do not have a pension at all. With the 401(k)s, many people borrow from those with the expectation that they’re going to pay them back. And they often don’t pay them back, so they end up just with Social Security.

We spend a lot of time trying to encourage people to save more. We encourage employers where they can to offer pension plans. The president recently enacted the MyRA account, which allows individuals to begin a savings plan, any amount. There are no fees for it. It is portable so the young people moving from job to job, they can take it with them. We’re hopeful that more and more people will begin the habit of saving.

Q: As more and more people retire with less income than they expected, won’t that increase political pressure to increase Social Security benefits?

A: I don’t think that’s a bad thing at all, so I’m not worried about it.

By law, we can only spend the revenues that come in, so I think the pressure would be to look at the entire program and determine what needs to be done to balance it. If the desire is to make a more generous benefit, then first Congress will have to decide, how do they do that? If they have to raise more revenues, then how will they raise more revenues?