What if Social Security Funds Ran Out – New Report
Last week, the Congressional Research Service issued a report, “Social Security: What Would Happen If the Trust Funds Ran Out?” Here is an excerpt:
“Maintaining financial balance after trust fund insolvency would require substantial reductions in Social Security benefits, substantial increases in tax revenues, or some combination of the two. The trustees project that following depletion of the combined funds in 2035, Congress could restore balance by reducing scheduled benefits by about 21%; the required reduction would grow gradually to 27% by 2094. An alternative could be for Congress to raise the Social Security payroll tax rate from 12.4% to 15.7% following depletion in 2035, then gradually increase it to 16.9% by 2094.”
Depending on which study you use, the funds will run out sometime between 2032 and 2035.
Here is the link: https://crsreports.congress.gov/product/pdf/RL/RL33514
In addition to reducing Social Security benefits (or the inflation adjustments to benefits) or increasing the Social Security tax rate (or some of each), Congress could do one or more of the following, either in addition to or in place of one or both of the above:
- Increase the wage base.
- Create a donut hole between the wage base and some amount ($400,000 has been proposed), and subject earnings above that amount to Social Security tax.
- Again increase the full retirement age.
- Reduce the amount by which benefits increase if someone defers benefits between full retirement age and age 70.
- Increase the amount by which benefits are reduced if someone takes benefits before full retirement age.
- Contribute funds from general tax revenue into the Social Security trust fund.
- Increase immigration.
- Begin doing some of the above before 2035 so the changes need not be as great, and so they could be phased in over a longer period of time.