The latest issue brief from the Center for Retirement Research on Social Security’s 2010 Trustees Report doesn’t contain many surprises. Social Security is not doing well, and costs will eventually exceed income. However, as Alicia Munnell, director for the Center, notes in the September brief, “the fact that the future of Social Security has been relatively untouched by the market collapse and ensuing recession is itself newsworthy.”
According to the brief, the Social Security cost rate has stayed below the income rate for the past two decades, and Social Security has enjoyed cash flow surpluses as a result of reforms enacted in 1983. It wasn’t until the increase in unemployment and subsequent decrease in payroll taxes, coupled with increasing benefit claims that the cost rate surpassed income. Furthermore, the cost rate should stay below the income rate from 2012 to 2014.
Beyond 2014, though, Social Security will have to “regularly tap the interest on trust fund assets to cover benefits,” and in 2025 the government will have to begin drawing on trust fund assets to cover benefits. Finally, in 2037, the trust fund will be exhausted.
What will happen in 2037?