The problems of Social Security are not going to disappear, according to the most recent projections. What is the future of this program? Will your benefits be cut in a few years? Will you run out of income from your retirement? These and other questions are swirling in the heads of millions of retirees and Social Security recipients across the United States.
According to the trustees of the program, in their latest update published earlier this month, the “day of reckoning” continues to approach for the Social Security program. The funds could run out before 2035, and if Congress or the Federal government does nothing about it to stop this situation, millions could see their income damaged in the future.
Possibilities and Necessary Measures for the Social Security
Higher taxes, benefit cuts, or a combination of both loom as possibilities in a future that no longer seems so far away. Congress still has time to implement measures to strengthen the retirement system, but it has not shown the necessary determination. Below, we answer six key questions about what could happen:
The Social Security system has two trust funds that maintain the surplus money accumulated in previous years: one for Old-age and Survivors Insurance (OASI) and the other for Disability Insurance (DI). The OASI fund, focused on retirement, will be exhausted in 2033, according to the latest estimate of the Social Security administrators.
The much smaller DI program is not expected to run out, and combining the two funds would delay its depletion until 2035, according to a new analysis by the Center for Retirement Research at Boston College. However, combining both funds would require a change in the law, which is unlikely, making 2033 the relevant year.
Trust funds are U.S. Treasury accounts that contain accumulated surpluses, which are expected to eventually run out. This is nothing new. However, “whereas before we had 68 years to figure out how to avoid burnout,” the Boston College report notes, “now we have nine years.”
Is There ACTUAL Danger of Social Security Going Bankrupt?
It is a question that generates a lot of concern. The answer, to give you some calm, is that no, for now Social Security is not expected to go bankrupt. However, retirees and other people who rely on benefits, such as Supplemental Security Income (SSI), could be seriously affected if the above happens.
If the Congress does not strengthen trust funds or implement other fixes, the Social Security Administration should cut benefits by 21% to match the level of payroll and other income taxes at that time.
Would Retirees Have Trouble Making Ends Meet?
Even if Social Security isn’t going to go bankrupt, many retirees would have trouble making ends meet. Currently, a typical 65-year-old covers 36% of their pre-retirement income with the Social Security check.
If what is being warned about happens by 2035, the Social Security check could only cover 29%, that is, a loss of purchasing power that would leave these people much more vulnerable than now.
Social Security was never intended to pay for everyone’s retirement expenses; that’s where personal savings, home equity, workplace 401(k) plans and other assets come in. Millions of current and future retirees could absorb a benefit cut, but those who rely on Social Security for most or all of their income could approach poverty levels. Congress could protect these people by shifting most of the benefit cuts to the wealthiest beneficiaries.
