Social Security shortfall, USA News: Social Security’s trust fund that pays retiree and survivor benefits is expected to begin running low on money earlier than previously expected, leading to questions from Americans who rely on the benefits for their living expenses.
Without congressional action, the fund is now expected to begin depleting by the fourth quarter of 2032, according to a report issued Tuesday by Social Security’s trustees, the body that manages the trust fund. The trustees note in the report a handful of changing conditions such as fertility rates, immigration, economic conditions and legislation passed since last year have changed the assumptions on which the report is based.
More than 56 million Americans receive retirement and survivor benefits from Social Security payments each month, according to data from the Social Security Administration. The money those beneficiaries receives comes from a combination of payroll tax contributions and interest to the Old Age and Survivors Insurance (OASI) trust fund. The amount recipients receive is calculated based on their lifetime earnings.
While projected depletion of the OASI trust fund does not mean that Social Security benefits will go away entirely, it does raise concern, according to experts in the field of Social Security benefits. According to the trustees’ report, the fund would be able to pay 78% of scheduled benefits for the rest of 2032, and then 62% of scheduled benefits until 2100.
Expert Perspectives on Congressional Timeline
“The issue isn’t whether Social Security disappears, the issue is whether Congress acts before automatic benefit reductions are necessary,” Ryan Swartz, partner and managing director of Creative Planning, a financial planning service, told ABC News.
Brett Loper, executive vice president for policy at the Peter G. Peterson Foundation, a nonpartisan organization focused on financial policy, said he too is concerned whether Congress will be able to pass legislation to shore up funding before the 2032 timeline. “I’d say it’s like flashing yellow about to be flashing red warning sign,” Loper said. “Six years is not a very long time in terms of major legislation.” Tyler End, CEO and co-founder of Retirable, a retirement planning firm, also stressed that time is of the essence.
The Social Security trustees — Treasury Secretary Scott Bessent, Health & Human Services Secretary Robert F. Kennedy Jr., Social Security Commissioner Frank Bisignano and acting Labor Secretary Keith Sonderling — say in the report that lawmakers could solve the funding issue by raising the tax rate, lowering benefits, changing eligibility requirements for benefits, or a combination of those approaches.
Guidance for Current and Future Retirees
In the meantime, experts who spoke with ABC News said that taxpayers’ reactions to the projected funding shortfall should vary based on their age and employment status. All agreed that immediate significant financial decisions should not be made based on these projections. Workers nearing retirement age need not panic but should pay attention, according to Swartz, emphasizing that current and near-future retirees would continue to have some level of Social Security.
For younger workers, experts advise viewing Social Security as part of the foundation of retirement income rather than the entire amount needed, building retirement plans that are not totally dependent on the federal government.
