Social Security has been prominent in the news of late, but that’s really nothing new. For decades retirees and workers paying into their Social Security accounts have been concerned about whether or not there will be enough money to pay them their benefits when they retire.
Of course, Social Security is more than a retirement program. It is insurance that provides retirement, survivors, and disability benefits. It currently issues checks to roughly 73 million people every month.
Will you be able to collect your benefits when you retire, or if you are disabled?
The answers, or projections, are provided each year in a collection of reports from the agency’s trustees, which include the Commissioner of Social Security as well as the Secretaries of the Treasury, Health and Human Services, and Labor. The reports, titled Status of the Social Security and Medicare Programs, are based on actuarial studies, released to the public by the trustees through the Office of the Chief Actuary of the Social Security Administration.
The most recent collection, dated 2024, essentially repeats the outlook from 2023. “As in prior years,” the opening “a message to the public” reads, “we found that the Social Security and Medicare programs both continue to face significant financing issues.”
The outlooks for Social Security differ for the retirement and disability programs. According to the report:
- The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033. At that time, the fund’s reserves will become depleted and continuing program income will be sufficient to pay 79 percent of scheduled benefits. The projected 21 percent shortfall after 2033 is based on estimates of future payroll taxes as well as benefits payments.
- The Disability Insurance (DI) Trust Fund is projected to be able to pay 100 percent of total scheduled benefits through at least 2098, the last year of this report’s projection period.
Should retirees and workers be concerned about the agency being unable to cover 100 percent of its obligations only eight years from now?
John Johnston, a retired public affairs specialist with the Social Security Administration who advises financial services companies as a consultant on Social Security, offered the following insights:
- Ideally the agency should be able to confirm solvency for 75 years into the future. Though that has not been the case since the 1990s, a period of high prosperity. A high-performing economy helps solvency because more workers making more money results in more and bigger payments into Social Security.
- The fund became unbalanced in 2021, that is, payroll taxes taken in were not enough to cover payments going out. Previously the monies not needed to make payments were invested in specially issued Treasury bonds. Since 2021, interest from those bonds is being used to provide the additional funds needed to meet payments. Those additional moneys will be depleted by 2033.
- Changes will be required to ensure Social Security solvency beyond 2033. One of the suggestions: Raise the retirement age. Another: Invest about a third of the current payroll taxes withheld for Social Security—6.2 percent for both employer and employee, or 12.4 percent total—in marketable securities as opposed to the Treasury bonds. “We floated that idea in a series of town halls around 2004 and 2005 and it was extremely unpopular,” Johnston said. Of note, Congress is responsible for any changes to be made to the program and program benefits.
Is it time for changes?
“Social Security is woven into the fabric of our economy,” Johnston said. “It’s the sole income of 35 percent of retirees.”
Johnston is confident changes will be made to ensure ongoing payments. “We don’t pull the rug out from under older folks,” he affirmed. “Still changes are needed, so they are likely to affect younger workers. We haven’t had an overhaul since the 1984 amendments, which created the trust funds and the purchase of treasury bonds.”
The Trump Administration has proposed cuts to the Social Security workforce, most recently about 12 percent or roughly 7,000 of the current 57,000 employees. While that should not impact the flow of current payments, cuts and departures are already affecting some services. Johnston advises workers nearing retirement age to apply for their benefits as early as allowable, that is, four months before they want to start receiving benefits.
The Office of the Chief Actuary has published an analysis of the various proposed changes to Social Security to address future deficits. For a description of each option and estimated effects on the OASSI and DI programs, go to the Social Security website.
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