Small COLA in Offing: Otherwise Sober Report from Social Security Trustees

Category: Financial and taxes in retirement

June 23, 2016 — The 2016 report of the independent Trustees of Social Security is out, and the news is nothing to be too happy about. Both Medicare and Social Security will soon be paying out more than they take in. The only small blessing for those currently receiving Social Security benefits is that it looks like there might be a small COLA (Cost of Living Adjustment) of 0.2% headed their way in 2017. Here are some other takeaways from the report, which make it clear that action is needed to keep benefits at least at current levels:

– Trust Fund reserves in the Social Security program that pays benefits to retirees, spouses, and their survivors (OASI) are projected to become depleted in 2035 (unchanged from last year’s report). At that time income coming in would be sufficient to pay 77 percent of OASI scheduled benefits. The elimination of the File and Suspend loophole will help modestly.

– The Trust Fund asset reserves of the Disability component of Social Security (DI) are projected to become depleted in the third quarter of 2023 (thanks to legislative efforts, that happens 7 years later than reported last year). At that time continuing income to the DI Trust Fund would be sufficient to pay 89 percent of DI scheduled benefits.

– The hospital-insurance trust fund for Medicare will exhaust its reserves by 2028. That is 2 years earlier than reported last year, but several years later than in 2009. The projections bounce around because of changing health care costs, benefit utilization, and revenues into the system. As the American population ages, benefits paid out can only go up.

Here is the link to the full 2016 Social Security Trustees Annual Report, which has more facts and background than you could ever imagine (much of quite interesting!)




Comments? It is clear that something has to be done to protect the Medicare and Social Security benefit programs that so many people rely on. Without changes, benefits have to be cut – but how will we pay to fix the problem? Please share your suggestions on the fairest and best way to fix the system please. Let’s keep it positive, no political rants, please.

Further reading
Forbes: The Truth About Solvency of Social Security




Posted by Admin on June 23rd, 2016

12 Comments »

  1. 0.2% thats a laugh!!

    by MaryJane — June 24, 2016

  2. I am always amazed that if the average person did what the government does, we’d be put in jail. I just don’t get it. How does Washington get away with it, and is there anything we can do to change things???

    by ella — June 24, 2016

  3. Yes, we do have an option. We can stop voting against our own economic interests. After over 35 years of experience, why can’t we finally accept that trickle down economics does not work for most of us? But, we continue to elect representatives that insist that it does. The payroll tax is regressive. Simply applying the payroll tax without an income cap or at least substantially raising the cap could go a long way toward securing the long term stability of Social Security. This is not a new or radical idea and those affected by the change would be the most able to afford the increase. However, unless we stop allowing social issues to trump (no pun intended) our economic interests when we vote, nothing will change.

    by MarkM — June 25, 2016

  4. MarkM. I agree 100%. We must stop making social issues our primary concern when electing our gov reps. Eliminate the SS cap. Increase tax revenue through job creation. That would bring in unbelievable money. Inact welfare/food stamp etc reform. Stop expanding SS to include those outside the perimeters it was intended. Return formula for COLA calculation to include healthcare costs, and everything else that should be included. American citizens must come first. We cannot support the world. The US is the largest economy in the world and needs to be run more like a business.

    by HelenB — June 26, 2016

  5. I agree, Mark. The 1% will not notice the tax increase in any real way. Let the voting begin.

    by Barbara — June 29, 2016

  6. Eliminate the cap on SS tax.

    by John P — June 29, 2016

  7. Can anyone tell me if living in Florida do you pay taxes on a total of 63,000 annual income based solely on SS and pensions?

    Thank you,
    Skip

    Editor’s note: Florida does not have an income tax. But you probably have to pay some federal tax. For more on this see http://www.topretirements.com/state/most_tax-friendly_states_for_retirement.html – there are 7 states with no income tax, plus NH and Tenn which tax only certain kinds of income.

    by Skip P — June 30, 2016

  8. Editor is correct, in case you miss his response because it’s not in a separate post.

    No income tax in Florida. Yeah!!! You cannot escape the federal income tax, no matter where you move.

    by Linda — June 30, 2016

  9. From Admin: This article has a lot of very factual info about Social Security and Medicare solvency. Not nearly as bad as many people think, but some things do need to be done to keep benefits coming as promised.

    http://www.nextavenue.org/truth-social-securitys-solvency/

    and here is another article with facts about the situation to calm the doomsayers.
    http://www.forbes.com/sites/nextavenue/2016/06/24/the-truth-about-social-securitys-solvency-and-you/

    by Admin — June 30, 2016

  10. I am not in the 1%, but would pay much more SS tax if the cap is removed. Almost twice as much in taxes. I assume that I would be able to draw twice as much when I retire some day. Seems only fair. Could the real solution is to quit voting politicians in to office that raid the SS coffers. I fear that even if the SS cap was removed, the politicians would spend the additional amounts on none SS programs or would create new programs to spend the money on. Why would it be different this time? The SS tax precentage and cap have been raised numerous times since its inception. Definition of insanity, doing then same thing and expecting different results. Time to attack the root of the problem, quit voting in politicians that will not hold the SS trust fund as sacred and not to be raided!

    by John — June 30, 2016

  11. To All:
    The Admin is correct. We are bombarded with bad information regarding the solvency of SS and Medicare the hope is that you will support candidate that support these valuable programs for seniors and vote against those that would attempt to destroy these systems.

    by Ron — July 1, 2016

  12. Thanks, John! I couldn’t have said it better myself!

    by ella — July 1, 2016

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