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And we're going to talk about first one of the myths. And I'm going to jump around a little bit here because I want to start with something that for years people in the media, and I have been guilty of this, we always use the headline, Social Security running out of money, or Social Security won't be there. In fact, when you poll people, you find that younger people don't think Social Security won't be around. And I'm going to start with you, Mary Beth, because that is not true. Even in the worst case scenario, there's still Social Security. Can you help dispel this myth so we can put it in the grave once and for all?

MARY BETH FRANKLIN: Absolutely. Social Security is not going bankrupt. There are long-term financing problems that we can deal with it. The basic formula is when we work and get our paychecks, a portion, 7.65%, is taken out of our paycheck as our contribution to Social Security, our future retirement benefits, and our employers match the same amount. That is our investment in the future. About nearly 40 years ago, when Social Security last faced a financing crisis, the commissioners were very clever and said, you know, baby boomers are going to start retiring in about 30 years, around 2010, so let's collect more tax revenue than we need right now and stockpile it. That's how we refer to the trust funds.

Well, over the last few years, the FICA taxes that we pay with our payroll taxes and the drawing down the trust funds are funding the benefits. Over the next few years, those trust funds are expected to run dry, that excess reserve, around 2034. At that point, there would still be enough of ongoing payroll taxes to pay about 75%, 80% of promised benefits. Now, no one is going to be satisfied with 75% of promised benefits. But it's a fixable problem. The thing is we have to get our congressional leaders to act.

ADAM SHAPIRO: OK. So, Jason, I want to continue this. Let's assume a worst case scenario. So if you're going to get $0.80 on the dollar at Social Security, what do most people in our country when they hit retirement, are most people living on Social Security and that is it? Because if you're only going to get $0.80 in a worst case scenario on the dollar, if Congress does nothing, what does that mean for how many millions of people?

JASON FICHTNER: Well, that's a really good question, Adam. And for many people, Social Security is their sole source of protected income in retirement. But a lot of people, of course, retire with a 401(k) plan. Some still have a defined benefit pension plan. They have other savings assets. So it's not just Social Security. But that doesn't mean we need to minimize this problem. The problem is very grave. And to Mary Beth's point, again, a worst case scenario, no one wants to live with a 20% or 25% haircut in their Social Security benefits. And it's important that we realize that for many people, especially those who are lower income, that is their sole source of retirement income.

So we can't just push this problem off until the trust funds are depleted. Because Social Security does not have its own borrowing authority. Under what's called current law, Social Security benefits will be reduced if Congress doesn't fix it, and we have to rely solely on the payroll tax revenue coming in, which is Mary Beth's point. So it's really important that we think about this not just as a Social Security issue, but a retirement security issue. And, again, for many low income people, Social Security is their primary or maybe even only source of protected income in retirement.

ADAM SHAPIRO: I'm remembering a book that was published, I think, four or five years ago, "Rescuing Retirement," in which they talked about the fact that even in a best case scenario, something like 25% of people in retirement might be in poverty unless we protect that, that we've been talking about, this 20% perhaps haircut, unless we protect that. Ramsey, I want to go to you. What is the average Social Security check payment? Do we know the number right now? And do we also know the number of people for whom Social Security is the only retirement income?

RAMSEY ALWIN: Sure. Well, there's a significant number of individuals, especially lives touched by the National Council on Aging, that rely on Social Security alone. And the last time I looked at the numbers, we were looking at about an average of $14,000 for men and $12,000 a year for women. That may have increased slightly with cost of living and so forth. But generally, it's a very modest amount but such a lifeline, and as Jason and Mary Beth have shared, a stable form of income for individuals that really can buoy the entire household because it is that reliable source of income.

ADAM SHAPIRO: Can you tell us what is the average amount of income for people who now receive Social Security? And is there a magic age at which people should begin to take their Social Security benefit?

RAMSEY ALWIN: The Social Security benefit claiming strategy is so important for individuals. The year in which you choose to take that benefit has significant implications for your lifetime benefit. So, for many, they are looking at age 62, that early eligibility, seeing that opportunity, especially if they've been reeling from the health and economic impact of the pandemic this last year. However, what is a best kept secret that so many individuals need to know is every year you delay, you get an 8% increase in that benefit. And when you claim at 62, you are taking a 30% cut in your lifetime benefit.

So if you can, find a job opportunity that allows you to continue that work to normal retirement age, or even delayed retirement at 70, you are going to have a greater benefit over lifetime. And that's so important, especially for women. Women, on average, are getting about a $12,000 annual benefit, a significant stabilizer of income. However, not enough to make basic ends meet. And men don't do that much better, with about a $14,000 to $15,000 annual benefit. So it's so important to think about that claiming strategy and what age might be the right time to either begin phased retirement or be able to access other forms of retirement income so you can delay your Social Security claiming as long as possible for the better benefit.

ADAM SHAPIRO: Jason, in a household with two working folk who might be married, they both are getting Social Security but then one of them dies. Does the surviving individual get the greater of the two checks? How does that work?

JASON FICHTNER: Yeah, the way the benefit's structured, the survivor benefit and spousal benefit, is that it makes sure that you are in some ways held harmless. You don't get both checks, but you get the higher benefit amount. And that's to make sure that someone who is deceased and has a spouse that passed away still has greater income that's required for protection. And just to double on what Ramsey said, this is also really important because that spousal benefit and survivor benefit is also based on when the primary worker claimed Social Security benefits.

So if someone claims early at age 62, then the spousal and survivor benefit would also be reduced. Where if they can delay claiming to their full retirement age or even to age 70, it's a greater amount. So I want to double down on something Ramsey said when talking about Social Security claiming. It is really important to figure out what is the right age. And it's not one age fits everybody. But the nomenclature, the language we use, is very important. Ramsey mentioned age 62 being called the early eligibility age. We really should call it the minimum benefit age.

Because people hear "early eligibility" and think it's just like lining up for a movie theater or getting early into a dinner reservation, that there's no penalty. But there is. In fact, you know, Ramsey mentioned a 30% cut in the monthly benefit amount. That's based on your full retirement age, which for most people now is going to be 67. But if you delay from 67 to 70, it's a 25% increase. So the actual difference between an age 62 benefit and an age 70 benefit is a 77% increase. And where else can you get a 77% increase in your monthly benefits by delaying a few years? This is what's really important. And, again, this impacts your spouse. It impacts survivor benefits.

There is a great short Social Security publication. If you just go into your browser and search "when to start receiving Social Security retirement benefits," it'll pop up. It's just a two-pager. But it walks through and shows you the difference that you can get in your monthly benefits. It talks about the personal decisions, thinking about yourself, your spouse, your other assets. This is something, generally, I think, Mary Beth, Ramsey, and I will all agree on, that if you need the money at 62, take it, right? Don't live in poverty. If you need it, take it. But if you can afford to delay, even if it's just one year, delay. Delay until you need the benefits. And then that will help you have a larger benefit for the rest of your life and also will impact a higher benefit amount for a survivor or spousal benefits.

ADAM SHAPIRO: Mary Beth, two-part question here-- can I start taking Social Security, but then go get a part-time job, collect my Social Security but also collect the income from the job. Let's say I take the benefit at 64.

MARY BETH FRANKLIN: It depends. This is one of the great myths of Social Security. People do not understand that if they claim their Social Security benefit before their full retirement age, and they continue to work and have earnings from a job, some or all of those Social Security benefits may be temporarily forfeited because of something called the earnings cap. Roughly, if you make more than about $19,000 this year, and you're collecting benefits before your full retirement age, Social Security is going to withhold benefits. Now, they're not gone forever. Once you get to your full retirement age, any benefits you have lost due to excess earnings are returned to you in the form of larger monthly checks going forward.

So my number one rule for people is, if you plan to keep working, don't claim Social Security benefits. It's sort of an accounting nightmare. However, if you retire early and you're working part-time making less than that, maybe that's a good way for you to get through things. But, in general, if you plan to keep working, as so many boomers say they plan to do, just wait till at least your full retirement age when the earnings cap disappears.

And, if possible, as both Ramsey and Jason has talked about, the ability to delay benefits up until age 70. And I'm going to add another strategy there. For married couples, just having one spouse, preferably the one with the bigger Social Security benefit, wait until 70 to create the largest possible retirement benefit while both spouses are alive and ensuring the largest possible survivor benefit after one dies. In the meantime, that other spouse may want to collect benefits early if she's not working, bring some money into the household and take away the sting of having the other one wait. It's a great coordinated planning strategy.

ADAM SHAPIRO: Mary Beth, very quickly, point of clarification for me, I might have missed it, what is that full retirement age? Is it 70 or is it dependent-- what is it?

MARY BETH FRANKLIN: The full retirement age is based on your birth year. If you were born 1943 through 1954, it's 66. If you were born in 1960 or later, it's 67. And for those years in between, it increases by two months per year. For example, people who were born in 1955, who turn 66 in two months this year, that's their full retirement age.

ADAM SHAPIRO: So, Ramsey, if I'm hearing this correctly, once you've hit the full retirement age, you can collect full Social Security benefits depending on-- well, you can collect full Social Security benefits and you can go get a job without jeopardizing those full benefits. Correct?

RAMSEY ALWIN: Once you hit the delayed retirement age, once you hit 70. Oh, once you achieve--

ADAM SHAPIRO: Full retirement age.

RAMSEY ALWIN: --the full retirement age, as Mary Beth illustrated.

ADAM SHAPIRO: OK. So, Ramsey, this question's for you. Have we been talking about the retirement earnings test? And if not, what is that? How does that work in this?

RAMSEY ALWIN: We have been talking about the retirement earnings test. That is when you are claiming Social Security and you do have a job, if your income surpasses a certain threshold, then your Social Security benefit is withheld until you get to that full retirement age.

ADAM SHAPIRO: So if your financial planner starts talking about the retirement earnings test, these caps we've been talking about, all of these are what we've been talking about. Let me go back to you, Jason, because there's another issue. Who's eligible for Social Security? We've been talking in the sense of retirees, but other people are eligible for Social Security. Fill us in.

JASON FICHTNER: Well, I think this is also just an important point, Adam, because people might be getting confused right now. And this is where Social Security can become very confusing because of the language we use, right? Early eligibility age, full retirement age. What is age 70? What is the retirement earnings test? We need-- what some people call the full retirement age the normal retirement age. What's normal anymore when it comes to retirement?

So I'm going to get to your question on eligibility, but I think it's important that we really start talking about Social Security as sort of this range between 62 and 70 for retirement benefits. Where if you claim at 62, you're going to get the minimum monthly benefit amount. If you wait until age 70, you'll get the maximum monthly benefit amount. And if you're worried about having any sort of earnings, this is a retirement earnings test, if you're worried about having any of your Social Security benefits withheld-- and again, they get made up later-- that's before basically your full retirement age, which is 66 and 10 months right now, going to 67 for someone who's my age.

So these become very confusing. And as Mary Beth points out, if you're going to continue working, you are likely better off delaying Social Security. Because Social Security retirement benefits were designed to be an income replacement for people who stopped working and retired. That's how the system's designed, and that's why you get all these complications with the retirement earnings test because if you're still working, why are you retired? You're not. So this is sort of that confusion.

And then this goes into eligibility. Because the benefit formula is a progressive formula that's based on your highest 35 years of earnings. But you qualify just after having what's called 40 quarters. So basically if you work one quarter, it counts. If you basically work 10 years, you can qualify for Social Security benefits. That's how it's basically addressed. But there's also a disability insurance, survivors. Again, we talked about spousal.

When I was at Social Security Administration, way too often I'd be traveling and someone would ask what I do for a living. I say I work for the Social Security Administration. And some would say, oh, that program's not going to be there for me when I retire, right? I'm like, no, it'll be there. We've talked about this. But it's more than just Social Security. It's also a disability insurance program.

And basically, for somebody right now who's my age, the chance of someone being disabled in their lifetime is potentially 20%. One in five people basically now under 50 have a chance of being disabled at some point in their life. That is actually increasing. It could be upwards of one in four. So this program is more than just a retirement program. It's also a disability program, a survivor's program, and with spousal benefits. And it's important we think about the holistic benefits of Social Security and not just the retirement benefits.

ADAM SHAPIRO: Jason, I just want to reiterate the bullet points you've just put out there. First, minimum 62, the minimum benefit if you start claiming at 62. The maximum benefit at 70. But eligibility, whether it's 62 or 70, you have to have worked roughly 10 years or the 40 quarters, as you said, in which you've paid in to the system. So essentially for most people, once you've worked 10 years or more, you will eventually be eligible for Social Security. Have we got that right?

JASON FICHTNER: That is correct. Yes, Adam.

ADAM SHAPIRO: So let me start with you, Mary Beth. Because we started this off with the myth that Social Security won't be there, and we talked about the trust fund. The trust fund will be depleted. So Social Security will still be there. What could Congress do now to replenish that 20% we were talking about that could be in jeopardy?

MARY BETH FRANKLIN: Well, first of all, they have to start the conversation. If we look back to the last time Congress made major changes in 1983, they did a combination of things. They increased, gradually increased, the full retirement age from what was then 65 and will eventually become 67. There's talk that perhaps we should do that even further, to 69 or 70. But don't panic. We're talking for today's two-year-olds. They'll get used to it. They'll probably live to 120. What Congress did so well in 1983 is it essentially phased these changes in over a 40-year period.

There's also talk of should we change the tax structure? Either the rate of taxes we pay, should we increase that a bit? Or should we increase the amount of money that is taxed? Right now, roughly the first $140,000 of wages this year are taxed for payroll tax purposes. If you earn less than that, everything you earn is taxed. If you earn more than that, it's not taxed for Social Security, period. And there was talk back in 1983 that as long as 90% of US wages were taxed for Social Security purposes, this system is good in perpetuity.

But over the last few decades, there has become so much income inequality, where so many people make more than this taxable wage base and therefore do not pay to finance Social Security with those excess wages. That now, only about 83% of US wages are being taxed to fund Social Security. So ultimately, it will be a combination of changing things on the revenue side to bring more money in and perhaps changing things in the benefit formula of who gets benefit when. The key, as Ramsey has pointed out, that this is crucial, particularly for lower income and very elderly Americans. And even though Social Security has a cost of living adjustment, it often does not reflect the actual services and goods that the elderly are buying. Things like medical costs are often not reflected to the scale of what they're spending in their budget.

ADAM SHAPIRO: Ramsey, on top of this of what Congress could possibly do, is there any discussion about perhaps just removing that cap on how much you pay to Social Security on income? So that once you pass that whatever, it's about $140,000 in income, they would keep collecting past that for people who are, you know, fortunate enough to have those kinds of incomes?

RAMSEY ALWIN: Well, at the National Council on Aging, we really believe we need to have these discussions and move sooner rather than later. Every day we delay having the really substantive conversations about the many policy levers that are available to us, we find that we may be in a corner and have tougher decisions to make. So we fully support having a conversation sooner rather than later, getting the FICA coverage back to the intended state of 90% of aggregate wages. And there are absolutely conversations about scrapping the cap, as they say, and just lifting to cover 100% of wages.

I think there are many important conversations. They need to happen sooner rather than later. And we also need to think about in addition to shoring up solvency, ways to strengthen the program, especially for low income individuals and women, that due to low pay, caregiving years, are finding that they are aging and they're claiming benefits are quite modest. And they are so very reliant on Social Security. So we're eager at NCOA to make sure the conversation's underway, all the options are on the table. We keep our promise to today's retirees and future retirees that Social Security will be there, and it will be stronger than ever before.

ADAM SHAPIRO: Jason, I want to let you add to this, but I got to ask you a quick question. Are your Social Security benefits taxable once you-- because you've already paid in taxes as you were working. Can you get a double whammy? Or because of the tax code, most people won't wind up paying taxes on Social Security?

JASON FICHTNER: So Social Security benefits can be taxable if you have additional outside earnings up to a certain level. So, again, this is in some ways it's a progressive benefit. The tax rate is regressive, but the benefit is progressive. So for lower income people, they get a higher replacement rate than higher earners in a lifetime. But for those who have other income and retirement, up to 85% of your Social Security benefits could be taxable, yes.

And this is also one of the important sort of policy fixes is you could make Social Security benefits completely taxable for higher income individuals. So you could assign it for those in the top two tax brackets, their benefits are 100% taxable, so you wouldn't hurt lower income earners.

ADAM SHAPIRO: What about this discussion, Jason, of means testing Social Security? I would imagine a lot of people even if they're high income might balk at that since they've paid 30, perhaps 30 plus years into the system and feel that they might have earned that benefit.

JASON FICHTNER: So this has always been a political controversy with the taxable benefits. So the fact that some of the benefits are taxable for higher income earners, that is in some ways a backdoor means test. When you hear someone talk about means test, what you hear is, you're making too much money. We're going to reduce your benefit check. I don't think we're ever going to get to the point where we're going to means test Social Security and start reducing people's benefits check. What we do now is we collect on the back end on the 1040 when you file your tax return. So there is a backdoor means testing now. And, again, one of the policy levers could be to make benefits 100% taxable for higher income workers.

And this goes into Ramsay's point about the policy levers. Like, where do we talk about how we can do things to shore up Social Security? And, you know, Mary Beth and Ramsey hit all the high points. I want to just double down on one, which is the cost of delaying. 10, 11 years ago, when I was working at the Social Security Administration, I was a secretary of the board of trustees, the trustees who send out every year the Trustees Report that right now is late and will be coming out sometime this summer. And that's the one that estimates the depletion date for Social Security. 10 years ago, if we had enacted the policy lever of removing the taxable maximum, which both Mary Beth and Ramsey mentioned, as a way to bring in more revenue, if we had done that 10 years ago, that would have put Social Security back on 75-year solvency.

We don't have that option today. If we remove the cap now, we're probably getting close to maybe 35%, maybe 40% of that 75-year solvency. We've lost that as being the primary option. So now you're looking at additional revenue increases or benefit reductions in some way, shape, or form. But this is the cost of delay. Imagine if we wait another 10 years to the point of trust fund depletion before Congress decides to act. That delta's going to grow larger and the required changes will be much more meaningful and impactful, whether on the benefit reduction side or the tax increase side, and really do a lot more harm to beneficiaries and taxpayers.

ADAM SHAPIRO: So let me start with you, Mary Beth. One final thought you want to share with everybody?

MARY BETH FRANKLIN: Yes, I wanted to go back to the idea of who is eligible for benefits. While it is correct that you need at least 10 years of work to be eligible, the amount you will receive will depend on your lifetime earnings. The longer you work and the more money you make, your top 35 years is going to result in a bigger benefit. So no one should be satisfied with, oh, I worked 10 years, I'll get a Social Security benefit. It would be a very small one. So you want to try to get those full 35 years. And then the final decision is, at what age do I first claim the benefit? The sooner I claim, the bigger my haircut is going to be for the rest of my life.

ADAM SHAPIRO: Ramsey, final thought, but very quickly, there's a cap as to the maximum amount you can get in your Social Security benefit. It might change over the years, but it's capped, right?

RAMSEY ALWIN: Well, going back to Jason's point, it's a progressive program. And the best way for individuals to understand what they will likely receive is to go to SSA.gov and create Your My Social Security Account. We used to get those mailings every year with our Social Security records. But now it's important that you go online, you open up your own account, look at what your earnings are and your trajectory for those years between 62 and 70 so you can make the most informed decision and understand what you're claiming rate will be as a result.

ADAM SHAPIRO: But very quickly, I mean, might there be people hypothetically getting a $7,000 Social Security cap? Or there's a max as to how much you could get?

RAMSEY ALWIN: Individuals, it is all based on your earnings. It's all based on those earnings years. And so there is a cap in terms of the highest earners, what they will ultimately receive.

ADAM SHAPIRO: Mary Beth, you wanted to make a comment before I go to Jason?

MARY BETH FRANKLIN: This year, if you retired at your full retirement age in 2021, the maximum for a lifetime high earner is about $3,000 a month at full retirement age. If they waited up until age 70, they get more on top of that. It could be about $3,600 a month. So it can be a significant benefit, also emphasizing why it's important to decide when is the best time for you to claim.

ADAM SHAPIRO: Jason, last thought?

JASON FICHTNER: Oh, the beauty of getting the last words, Ramsey and Mary Beth have said pretty much everything I wanted to say. So they did a great job. I will just double down on the importance of a claiming decision. This is where we need to get back to those kitchen table conversations. It's not just about you, especially if you're married. It's about your spouse. There's survivor benefits, there's spousal benefits. Consider the importance of Social Security as your primary inflation-protected annuity in retirement.

And, again, as both Mary Beth and Ramsey and I have said, that the power of a delayed benefit, that increased monthly benefit amount, lasts for the rest of your life. And so if there's longevity in your family, and you're worried about potentially higher health care costs, those monthly benefits are going to last the rest of your life. So if you can delay claiming, you should delay. If you need the money early, obviously, take it at 62. But if you can afford to wait, you should wait as long as possible up until age 70. There's no benefit delaying past age 70, so don't wait past age 70. But if you can delay, you should.

ADAM SHAPIRO: Thank you, Jason Fichtner, as well as Mary Beth Franklin and Ramsey Alwin. Shai, back to you.

SHAI AKABAS: Well, thanks to you, Adam. That was a terrific conversation. And thank you to all our panelists for an excellent panel. And most importantly, thanks to all of you for tuning into today's conversation. To learn more about Social Security and retirement policy, you can check out our work at www.bipartisanpolicy.org. And you can also learn more about Funding Our Future and how to get involved in the coalition at www.fundingourfuture.us. Take care.