Tens of millions of people rely on Social Security, but the retirement benefits program has faced financial challenges for a long time. A flood of new retirees has created a demographic imbalance in the way that Social Security traditionally funded itself, and it's now imminent that the federal government will have to start tapping Social Security's trust funds in order to keep paying benefits at the levels it has promised.
To keep the public informed about the financial condition of Social Security, the trustees of Social Security's trust funds have a legal obligation to issue an annual report. Although the full 270-page Trustees Report has large amounts of sophisticated actuarial analysis standing behind it, its conclusions are relatively easy to understand, and they underscore the size of the challenge facing lawmakers to address a steadily worsening situation. Here are the five most important things to take from the latest Social Security Trustees Report.
1. Social Security is getting a year's reprieve
The biggest takeaway from the Trustees Report is that the hypothetical combined trust fund balances will reach zero in 2035, which is a year later than last year's 2034 projection. For the trust fund targeting retirement and survivor benefits, last year's projected depletion date of 2034 remained the same. However, with continued declines in applications for disability benefits, the report now expects the disability trust fund to last until 2052 — fully 20 years longer than in the previous report.
That might suggest to some that simply transferring money from the disability trust fund to the retirement trust fund could be a solution. Yet because the amount of retirement benefits paid each year is so much larger than disability benefit obligations, that only buys the combined program an extra year — leaving the broader problem unresolved.
2. Retirees will see a smaller benefit cut after 2035 than previously anticipated
Many people mistakenly believe that if Social Security runs out of money, benefits will stop immediately. Yet with continuing revenue from Social Security payroll taxes and other sources, the program will still pay the majority of promised benefits even with no other changes.
