If you read headlines saying Social Security isn’t going bankrupt or insolvent, they are right, but that doesn’t mean there is nothing to be concerned about.
Social Security is headed toward depleting the retirement benefit trust, but as long has there is incoming tax revenue, reduced benefits will be paid.
However, many retirees with feel the impact of an immediate 19-20% reduction in benefits
According to the latest projections from the Social Security Trustees Report, upon depletion of the combined OASI and DI trust funds (expected around 2034), benefits would initially be reduced to about 81% of scheduled levels, resulting in a roughly 19% cut. (estimated % vary and can change).
However, reduction would not remain static; the payable percentage is projected to decline gradually over subsequent decades due to ongoing demographic shifts, such as an increasing ratio of retirees to workers and scheduled benefits growing faster than revenue from payroll taxes.
These changes would occur incrementally each year as the actuarial imbalance worsens, rather than as a one-time event.
Unfortunately, as treasury bonds assigned to the Trust are redeemed to pay current benefits, we are demonstrating the need for a trust reserve and assuring it is maintained.
As the bonds are being redeemed and not replaced, interest paid to the trust also declines. If benefits are reduced, income taxes paid on SS benefits which go into the Social Security and Medicare trusts are also reduced.
Congress must act to adjust taxes, benefits, or other factors to prevent or mitigate reductions.
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