Social Security’s Board of Trustees have released their annual budgetary status of the nation’s largest entitlement program. The challenges confronting the program are no mystery, with different variables undermining the long-term solvency of the trust fund. The key takeaway from this year’s report relating to the Old-Age and Survivors Protections (OASI) – which pays month to month retirement benefits to Americans – reads: “The OASI Trust Fund reserves are projected to become depleted in 2034, at which time OASI income would be sufficient to pay 76 percent of OASI scheduled benefits.”
In other words, if there are no legislative changes in the next 15 years, Social Security income could be cut by nearly 24% for all beneficiaries. Obviously, this can be a major concern for those relying on Social Security income to sustain their lifestyles. An SSA brief calls upon Congress to consider additional actions in the same vein to help extend solvency, citing the “many policy options” that may mitigate financial shortfalls.
So what might those changes be?
SSA has already delayed the Full Retirement Age (FRA) twice, once from 65 to 66 and then later from 66 to 67. A further postponement of the age in which a beneficiary can collect their full Primary Insurance Amount (PIA) may be a possibility.
In 2020, earned income beyond $137,700 is not taxed at the 6.2% rate that supplies the Social Security trust fund. Some legislators have proposed adjustments to these limitations to provide additional revenue to the program via increased taxation on affluent Americans who earn beyond that limit.
Increasing the payroll tax rate beyond 6.2% for all contributors could also provide added revenue for Social Security.
Other benefits calculation changes, updated cost-of-living adjustment (COLA) methodologies, reduced benefit payouts – or a combination of any of these possibilities – could add up to the necessary changes.1
Please note that this information is preliminary and could change with legislative action. iPlan will continue to monitor proposals and legislation as they occur to keep you informed.