It probably hasn’t escaped you that social security disability is on track to go broke, at least according to most news outlets. Perhaps “broke” is a bit of an exaggeration but the situation is dire to say the least.
Unless Congress steps in before the end of 2016, the Social Security Disability Insurance (SSDI) trust fund will see steep cuts in the program, amounting to a 19% reduction in benefits.
Since most disabled people barely scrape by as is, such an act by the federal government would devastate the 11 million Americans that currently rely on disability benefits as their sole source of income. In fact, a cut this big would push millions below the poverty level of $973 per month.
Now, can you imagine the government letting that happen? There would be hell to pay! Well, the good news is that it probably won’t, as I explain below.
Additionally, I’ll explore where Social Security is headed and what it means for us as disabled folks.
THE TEMPORARY FIX FOR SSDI
In the 80 years since FDR signed the Social Security Act in 1935, the program has had its share of problems. And one problem we face today is a repeat of 1994 when the disability fund ran dry.
To keep the program afloat, Congress was forced to move tax revenue from the bigger Social Security retirement fund into the smaller disability fund. It worked for a time but it was a temporary solution to a long-standing problem.
If Congress reallocates tax revenue again this year, disability funds will extend to 2034 while retirement funds will lose a year, lowering from 2035 to 2034. So while SSDI recipients can breathe a sigh of relief, retired Americans will be up in arms.
Undoubtedly, Congress will first address the immediate problem of replenishing the disability fund before worrying about the retirement fund — basically kicking the can down the road for the next generation to contend with.
President Obama is behind the initiative and all accounts suggest that the bill will be passed.
We wait with baited breath!
GETTING SSDI BACK ON TRACK
In the past 50 years, Americans have gone from 1% on disability to almost 5% — a 400% increase! As a result, the system was depleted in just a few short decades. So what accounts for the surge of people on disability?
Well, for starters the number of baby boomers receiving benefits has increased enormously. [source] Secondly, there are more family members financially dependent on disabled relatives now receiving benefits. Then there’s the issue of people committing disability fraud, pulling the wool over the government’s eyes.
Let’s take a closer look at this last point.
Tackling SSDI Fraud
Unfortunately, a percentage of people collecting disability benefits are fraudsters which have caused disability claim examiners to become more distrustful. It stands to reason when you hear a story like the man who faked cancer to collect disability benefits. [source]
Worse still, these con-artists have made it more difficult for people with legitimate disabilities to get approved for benefits — a terrible consequence considering so many are already on the brink of poverty. And if you suffer from something like an “invisible illness” (e.g., chronic pains, mental illnesses, etc.), the challenge is even greater.
There’s also another kind of cheater taking advantage of the system — those who recover from a legitimate disability but continue to collect benefits without letting the government know. Like the man who opened a taco restaurant while simultaneously collecting disability benefits for six years. [source]
With stories like these, it’s no surprise that fewer than 1% of people on disability ever give it up. No wonder Social Security has trouble squaring the books!
It’s obvious that reforms are needed and the government is starting to make moves in this direction. There’s talk of stricter and more regular disability reviews once approved for SSDI and better vetting before benefits are rewarded. For instance, the government may start checking social media profiles of applicants to make sure no disqualifying discrepancies appear (e.g., recent photos of a disabled person windsurfing in Hawaii, etc.)
Re-entering the Workforce
Aside from people committing fraud, a great number of Americans whose health condition improved while on disability would like to start working again but choose not to for fear of relapsing after giving up their benefits.
Many may not be aware that Social Security offers a nine-month trial period to test out one’s ability to work without losing benefits. If more people took advantage of the offer, fewer Americans would be on disability. Would it repair the system? Probably not but it would be a step in the right direction.
SO WHERE IS SOCIAL SECURITY HEADED?
The hard truth is that even if the government gets the disability fund under control, it’s unlikely to prevent the greater Social Security retirement program from eventually falling under its own weight.
Just as jobs have become far less secure than one or two generations ago, it’s foolish to count on Social Security alone for retirement income. In fact, it’s best to make plans based on the assumption that Social Security won’t exist. And if by chance it somehow prevails, consider the income a nice bonus instead of money to depend on.
As I see it, the only way to financial stability is by creating your own recurring income stream, independent from employers and the government.
To learn how to become financially self-sufficient, you’ll have to get out of your comfort zone and try things you may have never done before in business. It’s not always an easy road (especially if you’re disabled) but the results are definitely worth it.
NOW IT’S YOUR TURN!
So what are your thoughts about Social Security? Is it here to stay or will the bubble burst? Leave your comments below!