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Social Security reform that must take place
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No matter who is picked as president in the upcoming election, in today's column, I will tell you what he will do about Social Security reform. But before I get to that, I must once again go over the reason why reform is needed.

It all comes down to a simple matter of demographics. Aging baby boomers (like me) play havoc with the financing of the system. It's not our fault of course. It's just that there are so darn many of us. There are currently about 50 million Social Security beneficiaries. By the time all the boomers cash in their paychecks for pension checks, the numbers will have gone up dramatically. There are projected to be 85 million people getting Social Security benefits by 2030.

Despite the boomer generation's reputation for free love and uninhibited sex, they never transitioned their sexual prowess into baby-making proficiency. That means fewer young workers are coming along to finance their boomer parents' retirement. The Social Security system has operated in the black for decades at a three to one ratio of Social Security taxpayers to Social Security recipients. (In the very earliest days of the program in the 1940s and early 1950s, the worker to retiree ratio was much higher, but it quickly leveled off at three to one, and that's where we've been ever since.) But by 2030, that taxpayer to beneficiary ratio will be two to one. There will be about 170 million workers supporting those 85 million beneficiaries. And the bottom line is Social Security — as it is currently structured — simply cannot work with only two workers supporting each retiree.

However, regardless of all the scare stories you might hear from politicians or pundits who predict gloom and doom for Social Security if things don't change dramatically, our nation's bedrock retirement system can be kept solvent for many decades to come with some relatively modest adjustments.

Here is what President Obama will do in his second term, or what President Romney will do in his first term, about the future of Social Security.

First, he will establish some sort of bipartisan commission on Social Security reform. This isn't anything new. Every president in the last 30 years has set up a similar panel. Most of the time, they hold meetings, they get input from both experts and members of the public alike, and then they make a series of proposals for Social Security reform. Unfortunately, instead of acting on those proposals, various congresses and presidents in the last three decades have thanked the panel members for their expertise and then filed away their reports — never to be seen again.

That's where I think things will be different this time around. I believe we have finally reached the point where politicians and, more importantly, members of the public, are willing to take on the task of making some long-range reforms to Social Security. And here is a list of what I think those reforms will be.

—The retirement age will increase. The current full retirement age is 66. It's scheduled to increase to 67 in the next decade. They will almost certainly propose bumping that up to 68, probably effective in the 2030s, and possibly even to age 70, but not for another 50 years. This one change alone wipes out about 40 percent of Social Security's long-range deficit.

—Cost of living (COLA) adjustments will be lowered. For the past 40 years, the annual Social Security COLA increase has been pegged to an inflation index. But almost all economists agree that the inflation index used does not accurately measure the buying and spending habits of senior citizens. Using a revised inflation index would lower annual COLAs by just three-tenths of one percent. Yet that reform would eliminate about 20 percent of Social Security's deficit.

—Social Security taxes will be increased on wealthier Americans. Currently, workers pay Social Security taxes only up to $110,100 in annual income. In other words, Bill Gates pays the same amount of Social Security tax as your neighborhood plumber. Eliminating the wage base entirely would take care of about 70 percent of Social Security's economic problems.

—Future benefits will be reduced. If Mitt Romney is elected, I doubt that taxes will be increased on wealthier Americans. In that case, an alternate reform would be a change to the formula used to figure Social Security retirement benefits. It's too complicated to explain in this short space, but it would result in about a five percent reduction in future benefits. That would reduce the system's deficit by around 35 percent.

Earlier in this column, I labeled these as "relatively modest" reforms. But I totally understand that "modest" is in the eye of the beholder. When I recently was talking to a group of union officials, they booed when I discussed increasing the retirement age. When I gave a speech to a group of senior citizens, they booed when I talked about lowering cost of living adjustments. When I met with a local Chamber of Commerce, they booed when I mentioned the elimination of the taxable wage base. And when I gave a seminar to a room full of near retirees, they booed when I said that the benefit formula might change resulting in reduced future benefits.

Obviously, different groups will not like individual reforms. But I believe that taken as a package, a well thought out set of reforms that "spread the pain" across the spectrum of the American public will be supported by a majority of people.

These and other options for reform, along with an explanation of how Social Security is financed, are included in a fact sheet I have written. It's called "Myths and Facts About Social Security Financing." You can request a free digital copy by sending me an email at