Social Security is facing a major funding shortfall that could leave millions of Americans without sufficient income. The program’s trust funds, which hold nearly $2.7 trillion, are expected to be depleted by 2035, according to the program’s trustees. This would reduce benefits for current and future recipients by about 21%.
The Social Security system is funded through payroll taxes, with the government increasing the cap on income subject to taxation annually based on wage increases and inflation. However, the current funding model has been criticized for not being sustainable in the long term.
To address this issue, experts recommend several strategies. These include increasing the retirement age gradually to share the burden across generations, increasing the cap on income subject to Social Security taxes, and making adjustments to benefit growth rates to ensure lower-income retirees receive adequate benefits.
The government has taken some steps to reform the program, including signing the Social Security Fairness Act into law in 2024. This measure eliminates the reduction of benefits for certain public service retirees and could accelerate the crisis. However, this change may cause the trust fund to be depleted six months earlier than previously expected.
Experts also suggest that changes to Social Security should help constrain future growth in federal spending. The program’s solvency is closely tied to the overall budget deficit. Any proposed reforms will need to take into account the current and projected growth in the budget deficit.
Reform efforts have been ongoing since 1983, when the government enacted changes that gradually reduced benefits over time. These changes included raising the full retirement age and increasing the Social Security payroll tax rate. The most recent bipartisan effort to preserve the system’s solvency was in 2001, but a serious debate on these issues remains lacking.
It is essential to address the funding shortfall in Social Security before it becomes too late. Waiting any longer would leave millions of older adults with lower incomes than they were counting on, plunging many into poverty.
Source: https://theconversation.com/social-securitys-trust-fund-could-run-out-of-money-sooner-than-expected-due-to-changes-in-taxes-and-benefits-253508