Worried about whether you’ll see your Social Security benefits in your lifetime?
Baby Boomers needn’t worry too much.
Others that follow us into retirement? Well, that depends.
The 2014 Trustees Report on the status of Social Security (along with Medicare and Social Security Disability Insurance) said the program will be able to pay full benefits until the year 2033. After that, Social Security will still have sufficient revenue to pay about three quarters of benefits if no changes are made to the program.
For the oldest Baby Boomers (those born in 1946), they’ll be 87 and, like it or not, be in declining numbers by then.
The youngest Baby Boomers born in 1964 will be 69 at the point the trustees say the fund will be running a little thin.
The Center for Retirement Research at Boston College notes in its recently published report -- “Social Security’s Financial Outlook: The 2014 Update in Perspective” -- notes that the Social Security fund is financed on what it calls a “pay as you go” system.
Workers’ pay is taxed for Social Security and that revenue funds the current corps of retirees. The issue, which is no stranger to policy makers, is that the Baby Boomer retirees outnumber the current workers who are paying into the system.
The center notes that in “2020 taxes and interest will fall short of annual benefit payments, so the government will be required to draw down trust fund assets to meet benefit commitments. The trust fund will be exhausted in 2033.” It added: “The exhaustion of the trust fund does not mean that Social Security is ‘bankrupt.’ Payroll tax revenues keep rolling in and can cover about 75 percent of currently legislated benefits ...”
Of greater concern, according to the National Committee to Preserve Social Security & Medicare (NCPSS), is Social Security Disability Insurance (SSDI), which the committee said “faces a more immediate challenge and requires Congress action for a reallocation.”
The committee, in its “Analysis of the 2014 Social Security Trustees Report” said:
Trustees project the Disability Trust fund will be depleted in 2016, the same year projected in last year’ss report. This projected shortfall is not a surprise and Congress should reallocate income across the Social Security Trust Funds, as it has done 11 times before, to cover the anticipated shortfall. Disability expenditures have increased primarily due to demographic trends. When Congress took action in 1994 to address a shortfall in SSDI, it knew that it would have to take action again in 2015 or 2016. Unfortunately, some in Congress have politicized this anticipated shortfall and threatened to delay action in order to force cuts throughout the entire Social Security program.
One piece of good news in the trustees’ report is that they anticipate a 1.5 percent cost of living adjustment in 2015.
Also, according to the NCPSS, Medicare solvency remains greatly improved thanks to passage of healthcare reform, with the program paying full benefits until 2030, four years later than the 2013 report. Health care spending has also grown much more slowly. And Medicare Part B premiums are not projected to increase in 2015.
The future of Social Security will continue to be debated as these annual reports show guarded optimism about the program’s future solvency.
Said the Center for Retirement Research:
While Social Security’s shortfall is manageable, it is also real. The long-run deficit can be eliminated only by putting more money into the system or by cutting benefits. There is no silver bullet. Despite the political challenge, stabilizing the system’s finances should be a high priority to restore confidence in our ability to manage our fiscal policy and to assure working Americans that they will receive the income they need in retirement.