Finally, there’s some good news about Social Security. The 2024 Social Security Trustees Report is out, and while future cuts are a possibility, there is hope for a brighter future.
Predictions of the iminent bankruptcy of the Social Security Fund have been rampant for years. The simplest explanation is that Social Security is paying out more than is being collected and going into the trust funds to make up the difference. If this were to continue, the trust funds would be exhausted at some point, and the only money for benefits would be revenue being collected at the present time. However, there may be no need to worry, says this article “Social Security Retirees Just Got Some Good news About Future Benefit Cuts” from yahoo! finance.
The Old-Age and Survivors Insurance (OASI) Fund will be able to continue to pay full benefits until 2033. If nothing changes, there would need to be a 21% benefit cut at that time. The Disability Insurance (DI) Trust Fund is anticipated to be able to pay benefits until at least 2098.
What would happen if the OASI Fund were emptied? A few things could happen. A law change could combine the OASI and DI funds. Because this is a real possibility, the trustees share data on when the combined funds might be emptied.
In 2023, the Trustees Report said the combined funds would pay full benefits until 2034, but this year’s report shows there’s enough money to pay full benefits until 2035. It also notes that if any cuts were to go into effect, the money coming into Social Security from the combined funds would be able to pay 83% of promised benefits, up from 80% in 2023.
These may sound like small improvements but indicate a trend in the right direction. Much of this is due to stronger-than-expected economic growth, which has led to improved labor productivity and lower projections for disability benefits. Taken together, Social Security’s long-term stability is looking better.
The additional year means any benefit cuts will be smaller than previously anticipated. If needed, Congress could also act to fund the trust funds.
Lawmakers will unlikely allow this program to be defunded, since seniors continue to be a major voting block, but there’s still reason to prepare for what might happen in 2035, since many seniors count on Social Security to fund most of their retirement. Similar situations occurred in the early 1980s, and Congress passed amendments to protect the Social Security.
The new issue? Those amendments from forty years ago included a change to Full Retirement Age, when a person may collect an unreduced benefit. They also imposed a tax on some benefits for high-wage earners. As a result, there may be changes in the future.
Overall, though, the news is good. Hopefully, the good economic news will keep coming to protect Social Security, giving lawmakers more time to figure out ways to fund this vital program.
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Reference: yahoo! finance (May 16, 2024) “Social Security Retirees Just Got Some Good news About Future Benefit Cuts”
