hvactec
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The news in the Social Security Trustees annual report released Monday wasnt goodthe Trustees now project that the old age and disability trust funds combined will be unable to pay full benefits in 2033, three years sooner than projected in last years report. Thats in 21 years, the shortest period to trust fund exhaustion since before the last fix to Social Securitys finances in 1983. The grimmer outlook is due largely to changes in the Trustees economic assumptionsfor example, theyre now projecting lower wage growth and higher unemploymentas well as a higher than predicted 3.6% cost of living increase for beneficiaries in 2012.
So will Social Security suddenly stop appearing in recipients bank accounts come 2033? (I cant ask whether the check will stop arriving in the mail? since the Social Security Administration plans to phase out all paper checks by March 1, 2013 and as for the U.S. Postal Service come 2033, who knows?) Nope. As Social Security Commissioner Michael Astrue pointed out at a press briefing today, exhaustion is an actuarial term of art and it does not mean there will be no money left to pay any benefits. Come 2033, if Congress does nothing, there will be sufficient assets to pay 75% of the benefits. In other words, while the money the country has supposedly been squirreling away in imaginary trust funds will have run out, the taxes coming in should still be enough to pay 75% of promised retirement benefits. To pay 100% of benefits, the combined employer-employee tax rate would have to be raised in 2033 from 12.4% to 16.7%. If the tax were raised now, an increase to 15.1% would fund Social Securitys promises for the next 75 years.
In truth, the taxes coming in arent quite covering benefits now, even if you ignore the 2% temporary cut in the employee payroll tax. (In Washingtons magical accounting, the money that isnt going into the trust funds because of the payroll tax cut is being replaced from Uncle Sams deep-in-the-red general fund.) Without the 2% payroll cut, Social Security tax revenue in 2011 came to $691 billion, which was $45 billion shy of Social Securitys expenses of $736 billion. But when you count $111 billion in interest earnings that are imputed to the Social Security trust funds, the program is still operating in the black and the combined trust funds are still growing.
Okay, enough make believe accounting. The real question is whether that 25% shortfall would translate into a 25% benefit cut for everyone? Highly unlikely. As public trustee Charles Blauhous pointed out, politicians on both sides of the aisle have shown no stomach for cutting Social Security for the already retired or for the low income elderly.
Read more Will Social Security Be There For Your Retirement? - Forbes
So will Social Security suddenly stop appearing in recipients bank accounts come 2033? (I cant ask whether the check will stop arriving in the mail? since the Social Security Administration plans to phase out all paper checks by March 1, 2013 and as for the U.S. Postal Service come 2033, who knows?) Nope. As Social Security Commissioner Michael Astrue pointed out at a press briefing today, exhaustion is an actuarial term of art and it does not mean there will be no money left to pay any benefits. Come 2033, if Congress does nothing, there will be sufficient assets to pay 75% of the benefits. In other words, while the money the country has supposedly been squirreling away in imaginary trust funds will have run out, the taxes coming in should still be enough to pay 75% of promised retirement benefits. To pay 100% of benefits, the combined employer-employee tax rate would have to be raised in 2033 from 12.4% to 16.7%. If the tax were raised now, an increase to 15.1% would fund Social Securitys promises for the next 75 years.
In truth, the taxes coming in arent quite covering benefits now, even if you ignore the 2% temporary cut in the employee payroll tax. (In Washingtons magical accounting, the money that isnt going into the trust funds because of the payroll tax cut is being replaced from Uncle Sams deep-in-the-red general fund.) Without the 2% payroll cut, Social Security tax revenue in 2011 came to $691 billion, which was $45 billion shy of Social Securitys expenses of $736 billion. But when you count $111 billion in interest earnings that are imputed to the Social Security trust funds, the program is still operating in the black and the combined trust funds are still growing.
Okay, enough make believe accounting. The real question is whether that 25% shortfall would translate into a 25% benefit cut for everyone? Highly unlikely. As public trustee Charles Blauhous pointed out, politicians on both sides of the aisle have shown no stomach for cutting Social Security for the already retired or for the low income elderly.
Read more Will Social Security Be There For Your Retirement? - Forbes
