The Social Security program’s old age and survivors insurance funds will be exhausted in 2034, just as 86 million beneficiaries will be drawing from the program, the board of trustees predicted in its annual report, released Tuesday.
“As they have for many years, their projections show that the Social Security program faces a large and growing funding imbalance that must be addressed promptly to prevent across-the-board benefit cuts or abrupt changes in tax or benefit levels,” the Committee for a Responsible Federal Budget stated in comments on the report.
In 2034, when the OASI Trust Fund reserves are projected to become depleted, OASI income would be sufficient to pay 77% of scheduled benefits, the trustees’ 2018 report states.
“Swift action is needed to prevent seniors, surviving dependents, and people with disabilities from facing abrupt cuts in just a few years,” the committee said.
“The trust funds would run out of reserves when today’s 51-year-olds reach the normal retirement age and today’s youngest retirees turn 78,” the committee added. “At that point, every beneficiary regardless of age or income would face an across-the-board 21% benefit cut. That reduction will grow to 26% by the end of the 75-year projection window.
The trustees also stated that Social Security’s total cost is projected to exceed its total income in 2018 for the first time since 1982 and to remain higher throughout the projection period.
Social Security’s cost has exceeded its non-interest income since 2010, the report states.
For 2018, the cost of the program is projected to exceed total income by $2 billion and non-interest income by $85 billion. As a result, asset reserves will decline during 2018.
The Disability Insurance Trust Fund asset reserves are projected to become depleted in 2032, at which time continuing income to the DI Trust Fund would be sufficient to pay 96% of DI scheduled benefits.
The Committee for a Responsible Federal Budget warns that lawmakers should start making changes now. “Waiting 16 years to act would mean any tax hikes or benefit cuts have to be 35 to 40% larger,” the committee states.
— Check out Alicia Munnell: The Social Security Fix No One Wants on ThinkAdvisor.