A recent Social Security Trustee Report predicts that the sum of trust funds for social security retirement benefits and disability benefits (formally called old-age and survivor disability insurance benefits, or OASDI) will be exhausted in 2034. Did. These predictions use the best of the social security actuaries. Estimates of various assumptions for predicting the operation of the system over the next 75 years.
2034 is only 13 years away, but don’t panic about losing. all Your interests. Keep in mind that even if the trust fund is depleted, it does not mean that the social security benefits will be completely eliminated, as the trust fund is only a supplementary source of funding for social security. The FICA tax paid by workers, along with several other sources of funding, supports approximately 76% of social security benefits, even if the trust fund is completely exhausted.
The fiduciary’s report also estimates the magnitude of change that will be needed to make social security sustainable over the next few decades. The report shows that the estimated long-term shortage of social security is equal to 3.54% of the workers’ wages covered by the system. To balance the system’s finances and prevent a total benefit reduction in 2034, our politicians need to agree on a tax increase and benefit reduction package. This package requires a total of approximately 3.5 cents per $ 1 wage for workers.
Another way to see the deficit in the Social Security OASDI program is: The social security deficit is currently about 1.2% of gross domestic product (GDP). This means that for every $ 100 our economy will generate in 2020, we will need about $ 1.20 to fill the long-term deficit of our social security system.
Full trustees report that if Congress decides to eliminate actuarial deficits only by implementing tax increases, they will need to apply an immediate tax increase equal to 3.36% of salary. prize. Under current law, tax increases are evenly distributed among all eligible workers and employers.
Another possibility is to apply the FICA tax and pay beyond the annual wage base of social security. For example, in 2021, FICA tax will not apply to earned compensation in excess of $ 142,800. FICA tax application all Compensation beyond this amount will reduce most of the long-term deficit.
On the other hand, if Congress decides to eliminate the actuarial deficit solely by reducing benefits, an immediate 21% reduction in benefits must be applied to all current and future retirees. Other possible reductions in benefits include raising the retirement age at which current workers can withdraw social security benefits, reducing the value of increased living expenses for retirees, or reducing current worker benefits. Includes increase reduction.
The political challenges are: Republicans usually prefer lower benefits to reduce system deficits, while Democrats usually prefer tax increases.However, balancing the system is very impractical that’s all Tax increase or that’s all Accompanied by reduced profits. It is much more realistic to adopt a combination of tax increases and benefit reductions that require bipartisan support.
Social security is the most popular government program to date and is essential to the financial well-being of older Americans. If Congress fails to promise to continue funding the program, it can result in widespread financial difficulties for retirees and a major recession in the economy. With a reward of $ 3.5 per dollar, or $ 1.20 for every $ 100 of GDP, the cost of the required modifications seems to be moderate and affordable.
Delaying the necessary corrections only makes it more expensive and difficult for everyone involved. Our leaders need to set aside their differences and find a willingness to compromise on solutions that save programs that are of great value to millions of citizens.