The Social Security Trust Fund’s Problem
The Old Age and Survivors Insurance (OASI) benefits, known
as Social Security, pay retirement and survivors benefits through The Social
Security Trust Fund.
The U.S. Social Security Administration oversees this
fund. Social Security (SS) taxes and other income are deposited into the trust
fund accounts, and SS benefits payout from them. The only purpose for which
these trust funds are used is to pay benefits and program administrative costs.
The Trust Fund’s
Problem
The fund faces insolvency with fewer SS payroll taxes
collected due to a declining workforce and longer life expectancy. With less collected, The Social Security
Administration has been spending more on benefits than bringing in from payroll
taxes.
Initially designed for retired workers and survivors, the
program's funds depletion date is 2035. For Americans that will retire after
2035, the future of receiving their projected full retirement monthly benefit looks
bleak. The Social Security Administration estimates the ability to pay 77% of
promised benefits at that time. Here is Social Security's present situation:
- $2.6 Trillion in the fund earning 2.3% in Special Treasuries (redeemable
at face value like cash)
- Currently
Supports 50 Million beneficiaries through 150 Million workers paying social security payroll
tax.
- Inability
to borrow funds to pay obligations. Benefits only payable out of reserves and
current payroll tax inflows (UNDER CURRENT LAW)
- By
2032 - 2037 (without changes), the Reserve is estimated to be exhausted.
The Social Security Administration continues to sell
Treasury bonds to keep the fund afloat. However, the fund will significantly
deplete in the next twelve years. Some proposed solutions from the fund's board
of trustees include:
- Increasing payroll
taxes to help fund the Social Security program.
- Reducing or
eliminating annual increases in Social Security payments
- Increasing the full
retirement age from 67 to 69.
- Increasing the required
number of years participants must work before receiving Social Security retirement
benefits.
The 2023 OASDI tax rate is 6.2% each for employers and
employees; self-employed individuals pay the full 12.4% themselves. The tax is
collected on wages up to $160,200.
A poll conducted by Gallup found that 38 percent of working U.S.
adults thought Social Security would be a significant source of their income. Today,
57 percent of retirees rely on Social Security as their primary source of
income. Here are additional
strategies to help you get the most out of your Social Security Retirement
Benefits:
- Work 35 or more years and earn a
higher salary year after year.
- Do not claim Social Security
retirement benefits until your full retirement age.
- Use a Social Security spousal
benefits strategy.
- Maximize Social Security survivor
benefits and claim survivor benefits for your children.
- Estimate your longevity before
taking Social Security Retirement benefits.
Those retiring after 2035 must rely more on other retirement savings and less on their Social Security benefits. Here are some ways to help you save for retirement:
- Participate in your employer's retirement savings plan and contribute enough to receive the match.
- Automate your retirement savings contributions to increase yearly to maximize your savings.
- Contribute to a Traditional or Roth IRA and invest in stocks, bonds, real estate, mutual funds, and other strategies in addition to your employer's retirement savings plan.
- Work with a financial professional to help you plan for retirement and evaluate your current retirement savings, goals, and timeline.
Whether Social Security retirement benefits are available at the current levels or not, planning for your future is essential.