Social Security shortfall: Trust fund to run dry in 2035, trustees predict

[Teh One Who Knocks]

By Brittany De Lea | FOXBusiness




Social Security’s reserve funds are expected to be depleted in 2035, at which time the program will no longer be able to pay out benefits in full.

That’s according to the annual Social Security and Medicare trustees report released on Monday, which said total costs of the program, which covers the old age and disability insurance programs, will exceed income in 2020 – for the first time since 1982. That’s two years later than projected last year, but means the program will have to dip into its reserves to cover benefits at that time.

By 2035 those reserves will be depleted, and 80 percent of benefits will be payable.

In 2018, the trustees forecast that 100 percent of benefits would be covered through 2034, meaning the trust fund gained an extra year before expected depletion. However, the trustees are still urging lawmakers to take action sooner than later.

“Both Social Security and Medicare face long-term financing shortfalls under currently scheduled benefits and financing,” the trustees wrote.

Taken separately, the Old-Age and Survivors Insurance (OASI) trust fund will have enough reserves to pay full benefits through 2034. The Social Security disability fund, however, will not run out until 2052, about two decades later than what last year’s report projected. That change was attributed to a decline in disabled-worker applications and disability incidence rates.

The trustees combine the programs in the report to summarize the overall state of Social Security's finances.

Medicare’s hospital insurance trust fund is expected to run out of money in seven years, which remains the same as last year’s projections.

As a share of GDP, the annual cost of Social Security will increase to 5.9 percent by 2039 – up from 4.9 percent last year. Total Medicare costs will rise to 5.9 percent by 2038, up from 3.7 percent.

As of the end of March, more than 68.3 million people were receiving Social Security, Supplemental Security Income, or both. The average benefit was $1,347.06.

Combined, Social Security and Medicare accounted for about 45 percent of the federal budget in fiscal 2018.

[Teh One Who Knocks]

And yet democrats keep pushing the 'medicare for all' BS when they can't even do this right.

[RBP]

I don't buy the language in this article. Disability got so out of control that they changed the allocation system in 2015 to put less money into retirement benefits and more into disability claims. Then they tightened the screws on disability claims making it harder to get (which they should have because disability has become unemployment for people who have left the workforce). It's combined funds for all intents and purposes, the separated numbers are not very meaningful.

[Muddy]

You should only be able to get out what you put in. (I know I am wasting my breath)

[Teh One Who Knocks]

You should only be able to get out what you put in. (I know I am wasting my breath)

Stop being logical

[Muddy]

Stop being logical

Will we ever have a candidate that can do that?

[RBP]

It's a Ponzi scheme. And I don't believe there is an actual trust fund. Wasn't it converted it to bonds to rob the cash? So it's all IOU's?

[Teh One Who Knocks]

It's a Ponzi scheme. And I don't believe there is an actual trust fund. Wasn't it converted it to bonds to rob the cash? So it's all IOU's?

Pretty much this. Congress couldn't keep their hands off all that money just sitting there, so they kept 'borrowing' against it.

[Teh One Who Knocks]

It's a Ponzi scheme. And I don't believe there is an actual trust fund. Wasn't it converted it to bonds to rob the cash? So it's all IOU's?

Pretty much this. Congress couldn't keep their hands off all that money just sitting there, so they kept 'borrowing' against it.

I guess not....


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The Social Security Trust Fund Is Full of IOUs, Right? Wrong.
By Melanie Waddell - ThinkAdvisor



The annual calculations regarding the sustainability of the Social Security and Medicare trust funds are misleading and meaningless, and these funds have no assets other than a federal promise to pay. Right?

Wrong, say two Social Security experts.

“The law requires annual reports,” Nancy Altman, president of Social Security Works, a group that supports expanding the Social Security system, told ThinkAdvisor in a Monday email message. Altman, a former tax attorney and the co-founder of the group, was the assistant to former Federal Reserve Board Chairman Alan Greenspan when he chaired the bipartisan commission that developed the 1983 Social Security amendments.

Shia Akabas, economic policy director for the Bipartisan Policy Center in Washington, echoed Altman’s stance. The Boards of Trustees for Social Security and Medicare “are required by law to issue yearly reports on the status of both of Social Security’s trust funds — the Old-Age and Survivors Insurance (OASI), and the Disability Insurance (DI) trust funds — and the two Medicare trust funds,” he said. “Much of what is included in the reports is required precisely by statute.”

The two programs are “insurance programs,” added Altman, who also taught at Harvard University’s Kennedy School of Government and the Harvard Law School.

The Federal Insurance Contributions Act, or FICA, “requires that the revenue be dedicated to Social Security, only to be used for the payment of benefits and related administrative costs. Until the funds are needed, the law requires that the monies be held in trust and invested,” she explained. “From the beginning, Congress has required that the funds be invested in the most secure investment around — Treasury bonds backed by the full faith and credit of the United States. These are not casual promises to pay, but legal instruments that have the same legal protection and standing as all other treasury bonds.”

The “IOUs” pejorative was “first used in the 1936 presidential election by Alf Landon to try to discredit the newly enacted program,” Altman continued, and those who still call them IOUs “are either uninformed or deliberately seeking to undermine confidence.”

BPC’s Akabas, who assisted Fed Chairman Jerome Powell in his work on the federal debt limit, and now steers BPC’s Commission on Retirement Security and Personal Savings, told ThinkAdvisor in his email message that the Social Security OASI trust fund “is indeed an accounting mechanism rather than a store of value, but it is important for both political and policy reasons.”

Why? “First, by law, the program cannot pay out more in benefits than its income once the trust fund’s assets are exhausted. That would mean a 23% cut to benefits in 2034. So there are serious practical implications of the trust fund balance, which is one reason why it’s important have that information disseminated.”

From a policy perspective, he continued, “the program for many years took in more than it paid out (reducing annual budget deficits), so on a cumulative basis, the program has more than paid for itself to date and has not yet added to debt held by the public. For that and other reasons, there is a compelling case that reforms to make the program sustainable can and should be phased in gradually.”

The trust fund is also a focal point for political action, Akabas added. “If the trust fund didn’t exist and there was no automatic change in benefits on the horizon to keep the program in balance, then the will for political action to reform the program and make it sustainable would likely be even lower than it is today. In fact, the trust fund is what forced action in the 1980s deal that extended the life of the program for more than half a century.”

[RBP]

That's a confusing article.

The Federal Insurance Contributions Act, or FICA, “requires that the revenue be dedicated to Social Security, only to be used for the payment of benefits and related administrative costs. Until the funds are needed, the law requires that the monies be held in trust and invested,”

the program for many years took in more than it paid out (reducing annual budget deficits)

[Teh One Who Knocks]

I guess it means because the trust fund had a surplus for some years, that surplus showed as a + for the federal government and made budget deficits look smaller than they actually were?

[RBP]

I guess it means because the trust fund had a surplus for some years, that surplus showed as a + for the federal government and made budget deficits look smaller than they actually were?

But did they take the money or was that just on paper?

[Teh One Who Knocks]

But did they take the money or was that just on paper?

[PorkChopSandwiches]

I better get my money

[RBP]

I better get my money

Your money's gone, you better hope that the Ponzi scheme pays out with money from the taxpayers to come.