The state of Social Security has recently been circulating in the news. Experts have forecasted that the Social Security fund is projected to run out by 2037. This has raised concerns for the millions of Americans across the nation who rely on the payments to make a living. However, depending on the outcome of the November 2024 elections, this depletion may occur even sooner.
The current state of Social Security
As of now, the Social Security fund is anticipated to be depleted by 2037. It is important to remember that the fund is increased each year by money tax payers put in as their contributions. This means that Social Security is not just going to “disappear” but rather that the fund will only be able to pay out 76% of what beneficiaries are entitled to. Because of this, Congress is scrambling to make a plan on how to increase the longevity of the fund in order to ensure that the benefits can still be maintained at the full 100%.
Currently, there are two options which the fund has: Either Social Security contribution amounts need to be raised or benefits currently being paid out need to be reduced. The Social Security Board of Trustees project that an immediate reduction in benefits of about 13 percent, or an immediate increase in the combined payroll tax rate from 12.4 percent to 14.4 percent, or some combination of these changes, would be enough to allow full payment of the scheduled benefits for the next 75 years.
The reserve could be depleted as early as 2031
If benefits are not cut, the fund may also be depleted by as early as 2031. Certain presidential candidates are not eager to cut benefits as this could impact voters who are not willing to see their payments reduced. Additionally, certain candidates have proposals to eliminate the taxes posed on Social Security. If this was put into place, $950 billion dollars would be taken away from the Social Security fund. In addition, proposed plans to end to tax on tips and overtime would also take away another $900 billion.
If these changes were made, the fund would become depleted faster and would be exhausted by 2031 rather than 2037. Other proposed tariffs and immigration plans if enacted would also deplete another $400 billion from the fund. While the short-term gain would be welcomed by beneficiaries, if these changes are enacted on the long-term outlook would be severely reduced Social Security for the future.
Social Security is a lifeline for millions of Americans
While Social Security is intended to be a supplement to retirement income, most recipients of the benefits rely solely on their payments to live off of. Social Security supports retired individuals, those with a disability, and those who have very little to no income through their programs. While a cut in income may be seemingly detrimentally, not doing something to increase the longevity of the fund now would mean the future of the fund would be at a reduced rate forever.
There have been many presidential candidates who have proposed radical changes to how Social Security operates. During President George W. Bush’s presidency, he proposed that Social Security be privatized. President Barrack Obama also proposed changes to his presidency which outlined increases in the Social Security payroll tax and reductions in benefits. This plan was to address the current problem the fund is sitting with, but it was not met with support when first proposed in 2011.
As the population ages and life expectancy increases, Social Security faces significant challenges in its concerns about its long-term solvency. There will need to be radical action taken by Congress to prevent total depletion of the fund.
