In contrast to last year, the Social Security Board of Trustees reports that Social Security Reserves used to pay benefits are projected to run out in 2035 — later than 2023’s projection of 2033.
This serves as good news for the 70 million people who receive benefits. About 50% of them depend on the program to afford basic amenities.
In a press release, the Commissioner of Social Security, Martin O’Malley, attributed the slight reprieve to the fact that more people are contributing to Social Security, thanks to strong economic policies that have yielded impressive wage growth, historic job creation, and a steady, low unemployment rate.
He maintained that as long as Americans across the country continue to work, Social Security will continue to pay benefits.
Future Woes
However, all is not well. The Board continues to sound the clarion alarm, urging Congress to work together and develop a bipartisan bill to pump more life into the program.
Social Security’s last major reforms were in 1983. Without legislative changes, Social Security reserves are on a path to depletion.
To remain solvent, the Social Security Administration suggests either increasing revenue, reduced benefits, or a combination of both.
Social Security Mechanics
The Social Trust Fund is comprised of two different accounts: Old-Age and Survivors Insurance (OASI) and Federal Disability Insurance (DI) Trust Funds.
The Board of Trustees report shows that in 2023, the combined income for the OASI and DI Trust Funds was approximately $1.35 trillion.
These funds primarily come from payroll taxes (91.3%) and interest on reserves. However, the program paid out a total of $1.39 trillion — a net decrease of $41.4 billion in Social Security reserves.
The program’s total cost began to exceed total income in 2021. The board projects that it will remain this way for the next 75 years.
The OASI Trust Fund is projected to be depleted by 2033. Meanwhile, the DI Trust Fund will not be exhausted within the 75-year long-range projection period. This is due to the low level of disability applications and benefit awards through 2023.
Decline In Social Security Reserves
The Board’s report projects that the combined Social Security reserves will steadily decline. Under current projections, they will be depleted by 2035 without intervention. Benefits may be cut to 83% of what they are now.
Future costs of the program will to exceed income due to demographic shifts, such as the baby boomer generation retiring.
Other contributing factors are lower birth rates, which leads to fewer potential workers, and income inequality.
The top 10% of earners (earn around $173,000 per year) collectively hold around 73% of the nation’s wealth.
In 2023, only wages up to $160,200 were subject to Social Security payroll taxes. As income inequality grows, the highest earners take home a larger portion of total income — much of which is above the taxation threshold.
That means a smaller share of total national income is subject to Social Security taxes.
Related: Nearly 7% of Americans Are Millionaires
2024 Election’s Impact on Social Security
The Board of Trustees typically comprises six members, four of whom are key government officials such as the Secretary of the Treasury, Secretary of Labor, Secretary of Health and Human Services and Commissioner of Social Security. The last two positions are currently vacant.
They are typically filled by two public trustees selected by the President and approved by the Senate to represent the general public’s interest.
Related: Millions of Social Security Recipients Affected by New Changes
