According to the latest trustees report, the unfunded liability in Social Security and Medicare is $163 trillion—almost seven times the size of our entire economy. An unfunded liability is the difference between benefits already provided by law and the future tax revenue expected to pay those benefits.

In a sound retirement system, we would have $163 trillion in the bank, drawing interest. In fact, nothing is being saved. Instead, payroll tax dollars are being spent the very day they come in the door.

To avert financial disaster for our children and grandchildren, we need to reform these entitlement programs. Yet reform efforts are easily demagogued by opponents unless they contain real benefits for the current generation of retirees.

Fortunately, there are reforms that would benefit today’s older adults, even as we prepare to save the system for tomorrow’s retirees. Here are a few problems that need to be solved and should have been solved long ago.

Problem: Robbery by red tape

Acting Social Security Commissioner Kilolo Kijakazi acknowledges that older Americans face extraordinary delays when they try to contact Social Security by phone. When they finally get through, the advice they get is often incorrect. When they claim benefits by acting on that bad advice, they are often not allowed to correct the mistakes. But if Social Security makes a mistake and overpays, it demands its money back. If the recipient can’t pay, Social Security stops sending monthly checks.

Poor administration by Social Security personnel is undoubtedly a major reason why:

• The typical retiree is leaving $182,370 (in present-value terms) on the table by claiming benefits too soon.
• 13,000-plus widow(er)s collectively have lost $130 million in Social Security benefits because of mistakes in claiming spousal benefits. (This estimate is from Social Security’s own inspector general.)
• Married couples also lose thousands of dollars because they make mistakes in claiming spousal benefits.
• It is not surprising that Social Security personnel make so many mistakes. The system has 2,728 rules and hundreds of thousands of pages explaining the rules, governing just 13 basic benefits.

The answer: Let Social Security be managed like an efficient private pension fund.

Problem: Penalties for working

The Social Security earnings limit for people who have not yet reached the normal retirement age is $21,240. Above that limit, beneficiaries lose $1 in benefits for every $2 of earnings. In the year of their normal retirement age, they lose $1 in benefits for every $2 of earnings above $56,520.

When this tax on earnings is added to income, payroll and Social Security benefit taxes, middle-income older adults can face a 90% marginal tax rate.

The answer: Abolish the earnings test.

Problem: Taxation by inflation

Although Social Security benefits are indexed for inflation, the tax on those benefits is not. This means every Social Security recipient pays higher taxes when there is inflation—even though they may have no increase in real income.

Treasury inflation-indexed securities, or TIPS bonds, work like this: If there is 6% inflation, you get an additional 6% interest payment. Yet even though the extra interest keeps you whole, you still have to pay taxes on it.

The answer: Index the tax code so that recipients are not taxed on inflationary gains.

Problem: No HSAs for older adults

Older Americans are not allowed to contribute to health savings accounts, or HSAs, once they become eligible for Medicare. This denies them a right that younger people have: the ability to manage some of their own health care dollars.

The answer: Let them have access to Roth HSAs—with after-tax deposits and tax-free withdrawals.

Problem: Limited open enrollment in Medicare Advantage

Like the practice in the individual market exchanges, the relationship between buyer and seller in Medicare Advantage is asymmetric. Buyers must choose a plan (and the plan’s network) during a six-week period. They have another chance to change plans afterward, but beyond that point, they are stuck with their choice until the next open enrollment opportunity. Sellers, on the other hand, can change their network at any time during the year.

The answer: Institute continuous open enrollment.

Problem: Inadequate right of return

Medicare Advantage enrollees can always return to traditional Medicare. But if more than a year has passed, they are no longer able to enroll in a Medigap plan and pay premiums unrelated to their health condition in many states.

The answer: Let beneficiaries return to traditional Medicare without penalty.