April 26, 2019 — The Social Security Trustees annual report is out, which shows some small changes in the status of Social Security. This year, 2019, will be the last time that the amount paid out in retirement benefits is less than the money coming in – taxes paid into the system by workers combined with interest earned on reserves. But in 2034 the real crisis begins. That is when the reserves in the retirement portion of Social Security (OASI) are exhausted and the fund must rely exclusively on taxes paid in from working people to cover promised benefits. Starting that year, unless something is done soon, Social Security will be able to only pay about 77% of promised retirement benefits.
There are a variety of different ideas on how to fix the problem. Only one proposed solution has been proposed in Congress so far, and it has achieved solid partisan support. Introduced by Democratic congressman John Larson of Conn., his solution would increase both benefits and taxes. A few of the many Democratic presidential candidates are tossing out ideas that would eliminate or expand the maximum income subject to FICA taxes, increase payroll taxes, and/or add an investment tax. The Republican approach is to hold the line on increasing taxes while curbing benefit growth. Whatever the approach, the Trustees are urging Congress to do something, as the longer they procrastinate, the more serious the problem. The crush of baby boomers collecting Social Security retirement benefits finally starts to abate in 2030, when the last baby boomers should be starting to take their benefits.
One significant change in this year’s report is what is happening in the disability component of Social Security (DI). For whatever reason, new disability claims are declining, with the result that the fund is predicted to remain solvent much longer than thought earlier (2052 vs. 2032 last year).
The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust to them. Implementing changes sooner rather than later would allow more generations to share in the needed revenue increases or reductions in scheduled benefits. Social Security will play a critical role in the lives of 64 million beneficiaries and 178 million covered workers and their families during 2019. With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generationsThis is the conclusion of the 2019 Trustees Annual Report on Social Security – We agree!
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