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Social Security Fund Runs Out of Money One Year Earlier

Category: Financial and taxes in retirement

September 8, 2021 — The latest Trustees report for Social Security shows that the COVID-19 pandemic and the 2020 recession are affecting the future of this popular program, but no one is certain exactly how that will play out. One thing the report does lay out is that the Trust Fund will become exhausted in 2033, one year earlier than projected last year.

Given the unprecedented level of uncertainty, the Trustees say there is no consensus on what the lasting effects of the COVID-19 pandemic on the long-term experience might be, if any.

Based on best estimates, the 2021 reports show:

• The Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivors benefits, will be able to pay scheduled benefits on a timely basis until 2033, one year earlier than reported last year. At that time, the fund’s reserves will become depleted and continuing tax income will be sufficient to pay 76 percent of scheduled benefits.

• The Disability Insurance (DI) Trust Fund, which pays disability benefits, will be able to pay scheduled benefits until 2057, 8 years earlier than in last year’s report. At that time, the fund’s reserves will become depleted and continuing tax income will be sufficient to pay 91 percent of scheduled benefits.

So many conflicting currents

The Covid pandemic caused millions of people to lose their jobs, meaning they did not pay into the Social Security system. Many people became disabled, which increased payouts by the Disability Trust Fund. On the other hand, over 650,000 people have died from the virus, so those people will not be around to collect their Social Security (although any survivors will). Immigration numbers are down, which means fewer people are paying into the system. Fertility rates declined in this period of uncertainty, which will have long term effects on the size of the workforce supporting retirees. How all of these factors play out, no one is sure.

Bottom line for lawmakers – do something!

The Trustees report finishes with this stern warning: “Lawmakers have many policy options that would reduce or eliminate the long-term financing shortfalls in Social Security and Medicare. Lawmakers should address these financial challenges as soon as possible. Taking action sooner rather than later will permit consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.” We couldn’t agree more – quit fighting silly political battles and do something about the ticking time bomb that is going to blow up Social Security!

For further reading:
Summary of the Trustees Report

Comments? If you were in charge, what would you do to save Social Security?

Posted by Admin on September 7th, 2021

6 Comments »

  1. An interactive tool with many options to keep the fund solvent:
    https://www.crfb.org/socialsecurityreformer/

    by Mike — September 9, 2021

  2. Not many may remember this but during the Reagan administration the Social Security deduction was raised to 7.5% of your earnings. This was supposed to have created the Social Security “Super fund” which should never have run out. And it never would have but unfortunately, not long after congress began borrowing (maybe stealing is a better term), from the SS fund. But unlike most “loans,” the congress from the late 1980’s until today have failed to pay back even a single dime to the SS fund, thereby bringing it closer and closer to insolvency. Is there anyone, anyone in D.C. who has figured out that you can’t spend or tax yourself into prosperity?! If congress keeps this up SS will ultimately fail. If today (2021) they would stop “borrowing” from the SS fund we might have a chance…

    Editor’s Comment: Thanks for your comment Bill. Unfortunately we feel the need to correct your statement, which we hear from time to time. In 1983 Congress did authorize gradually increasing the ages for taking full retirement from age 65 to age 67. Individuals actually pay 6.2% of their wages and employers also pay 6.2%. But the money in the Trust funds is all there, it hasn’t been borrowed or stolen. Unfortunately the increased contributions and delayed retirement ages haven’t been enough to cover other trends, including increased longevity and a declining number of younger workers vs. the number of people collecting. See this article from AARP which debunks this and other SS myths. https://www.aarp.org/retirement/social-security/info-2020/10-myths-explained.html

    by Bill — September 9, 2021

  3. Fear not. Social Security is still the third rail of American politics (i.e. touch it and see your political career die).. Our Congresscritters will find a way to “save” Social Security just in time for an election. Heck, why don’t they just ask the Fed to create some more money out of thin air and dump it into the trust fund. They seem to be willing to do that for everything else. Too cynical? 🙂

    by JD — September 9, 2021

  4. JD, apparently hundreds of politicians are willing to touch SS and not have their political careers die: https://www.ncpssm.org/wp-content/uploads/2020/08/ncpssm-2020-final-scorecard.pdf

    by Mike — September 10, 2021

  5. Our friend Robert Powell has an excellent new article out on this topic: “Expect to receive 78% of your benefits in 2034

    by John Brady — September 13, 2021

  6. … and that 78% may be optimistic.

    by RichPB — September 14, 2021

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