Social Security Fund on Track to Go Bust by 2033: Trustees Report

A recent report from the Social Security Administration stated that there were nearly 400,000 more beneficiary deaths in 2020 than in 2019, a 17% year-over-year increase.

The impact of these deaths remains to be seen on Social Security payments, both in distribution and in potential payroll tax revenue.

Indeed, Nancy J. Altman, president of the advocacy group Social Security Works, stated in an email that “the rule of thumb is that economic changes have the greatest impact on the next five or 10 years, with demographic changes primarily affecting the long term. Consequently, a temporary increase in deaths among beneficiaries should not change the long range outlook significantly.”

But this may not have been an issue, Altman said. “With respect to the FICA reduction, if that had not been paid back but instead had been made permanent, that would have had a substantial impact.  Because it is being paid and was temporary, though, that should not have an impact either.”

The Trustees mentioned lower payroll tax income and lower revenue from income taxation of benefits having some effect.

Last year, President Donald Trump issued an executive order signed Aug. 8 declaring all payroll tax obligations, which fund Social Security, would be deferred through the end of 2020. The action was intended to provide relief for taxpayers amid the COVID-19 pandemic. However, those tax funds had to be paid back by April 30, 2021.

The Trustees concluded that “lawmakers have many policy options that would reduce or eliminate the long-term financing shortfalls in Social Security and Medicare. Lawmakers should address these financial challenges as soon as possible. Taking action sooner rather than later will permit consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.”