The Social Security Administration released its 2022 Trustees Report earlier this month. Of particular note was the revision of the trust fund data. The Social Security Trust Fund backs the payment of Social Security benefits; essentially it fills the gap between Social Security taxes taken in and Social Security benefits paid out.
Social Security trustees announced that the trust fund would be depleted in 2034. It is important to note that a zero “trust fund” does not mean the payment of Social Security benefits would also go to zero. Instead, the benefits paid out would drop to 77% of their original levels. When the trustees released their report in 2007 (15 years ago), the Social Security Trust Fund was projected to be depleted in 2042.
Does that mean your future Social Security benefits are certain to be impacted? The estimated Social Security shortfall between the future taxes anticipated being collected and the future benefits expected to be paid out over the next 75 years is $20.4 trillion. The entire $20.4 trillion deficit could be eliminated by an immediate 3.24 percentage point increase in the combined Social Security payroll tax rate or an immediate 20.3% reduction in benefits that are paid out to current and future beneficiaries.
We are optimistic that legislators will act to shore up Social Security before benefits are impacted – although we are skeptical that any significant progress will be made prior to this becoming a more immediate problem.