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The clock is ticking for Congress to shore up Social Security benefits.
The latest projections from Social Security’s actuaries show the program’s trust funds are due to run out in 2034, at which point 80% of benefits will be payable.
If Congress does not act by 2034, the program may be faced with an automatic 20% benefit cut for current beneficiaries, the need to increase Social Security taxes by 25% or a combination of benefit cuts and tax increases, according to a new report from the American Academy of Actuaries.
The program has been here before.
In 1983, Social Security’s trust funds were also close to depletion when a host of changes were passed by Congress.
But there were some advantages then that may not be available now. For example, there was more time for benefit changes, such as an increase to the retirement age, to be gradually phased in.
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Moreover, the cash shortfall was just 1% of taxable payroll. Today, it is three times as large, or 3.12% of taxable earnings, according to the American Academy of Actuaries.
Addressing the problem sooner rather than later can help in several key ways, according to the member professional organization.
Early action would make it less likely a 25% payroll tax increase would be needed in 2034.
Moreover, benefit cuts may also be smaller.
Making adjustments now would also give current and future beneficiaries a better idea of what to expect.
“The sooner you can have Congress come together and come up with some options to address these challenges, the better it is for the American people,” said Linda K. Stone, senior pension fellow at the American Academy of Actuaries.
“There’ll be more time for individuals to understand what’s happening and adjust their own financial plan,” she said.
While polls show the…
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