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The Social Security Trust Fund will be depleted in 2035 at current rates of deposits and spending, the trustees said in their annual report released 2 June.
The trust fund gained an extra year of solvency because of strong wage growth during the post-COVID recovery, which put more payroll taxes into the fund, the report noted.
However, in 2021, the fund’s outlay exceeded its expenses.
The fund will continue to bleed its reserves every year for the next 13 until the fund is emptied, the trustees predict.
At that point, Congress will be obligated to fund about 80 percent of benefits owed out of the general budget.
The trust fund consists of two parts. One pays retirees, the other pays benefits to persons with disabilities.
The disability trust has enough funds to cover benefits through at least 2096 at current rates, the report said.
Medicare’s reserves to pay hospital costs for older Americans will run dry in 2028, according to the group’s projections.
In February, the trustees said they expect Social Security benefits to be increased 3.8 percent next year.
However, benefits have increased partly in response to inflation, which is now flying above 8 percent.
The funding crunch lies at the convergence of two trends: the aging of the Baby Boom generation and a long-term decline in the American birth rate.
More Americans will qualify for benefits that a smaller number of workers will be expected to pay for unless Congress raises the age to qualify, adds funds to the programs, or makes other adjustments that will keep Social Security functioning, The Wall Street Journal noted.
TREND FORECAST: Consumer spending props up more than two-thirds of the U.S. economy and Americans are now gouging their savings to keep up their spending habit, as we note in “Savings Rate Slows as Consumers Spend Their Cash Cushions” in this issue.
With Americans unwilling to save, it will be up to Congress to adjust Social Security’s rule to ensure the program’s long-term future.
The alternative would be a compulsory savings plan mandated for all Americans, for which various ideas already have been floated, including additional payroll deductions that would be placed in individuals’ IRA-like accounts that they could manage but not touch until a certain age.
One idea: stop investing in war and start investing in the needs of Americans at home.