The annual trustees’ report from the Treasury indicates that Social Security beneficiaries may experience a 20% reduction in their benefits by 2034 unless Congress intervenes. As per the latest report by the Trustees, the Social Security trust funds are anticipated to exhaust by 2034, a year earlier than the previous projection, owing to the slower-than-expected economic growth in the near term.
The report reveals that the gross domestic product and labor productivity are predicted to fall by approximately 3% for the expected period. The Social Security program comprises two initiatives: one for retirees and another that offers disability benefits. The Old Age and Survivors Insurance and Disability Insurance (OASI) trust fund are estimated to deplete by 2033, with 77% of benefits still payable at that point in time.
Recent Statement From the Social Security Administration
A recent statement from the Social Security Administration (SSA) states that the revision of depletion dates is due to estimates that showed a decline of $22 billion in Social Security trust funds, totaling $2.830 trillion in 2022. Additionally, the program’s costs are predicted to surpass its total annual income in 2023 and continue to remain higher over the 75-year projection period.
Acting Commissioner of Social Security, Kilolo Kijakazi, has stated that the Trustees are advising Congress to take prompt action to gradually implement necessary changes in response to the anticipated trust fund shortfalls. She further added that Social Security is vital for the welfare of 67 million beneficiaries, 180 million workers, and their families in 2023. With informed debates, innovative solutions, and timely legislative measures, Social Security can continue to safeguard future generations.
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The Updated OASI Depletion Date for Social Security Highlights the Need for Immediate Action
Earlier this month, the White House introduced a plan to reinforce Social Security and Medicare. President Biden’s proposed budget aims to prolong the life of the Medicare Trust Fund by a minimum of 25 years by increasing the Medicare tax rate on incomes exceeding $400,000 and closing loopholes that permit high-income earners to evade that tax.
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Senior Citizens Are Concerned About a Retirement Crisis
As Americans grapple with inflation and increasing expenses, news of Social Security funds potentially running out sooner than anticipated has raised concerns. In June of last year, inflation hit a 40-year high of 9.1%, and while it has since stabilized, essential items such as food, fuel, and housing remain costly.
Mark Warshawsky, a senior fellow at the American Enterprise Institute (AEI), has suggested that persistent inflation may imply that the Trustees’ assumptions about its effect on Social Security funds are overly optimistic.
A recent survey conducted by the American Advisors Group (AAG) found that the vast majority (89%) of seniors are concerned about a retirement crisis in the United States. This comes amidst reports that Social Security funds may be depleted earlier than expected, as well as rising inflation and costs for essential goods and services.
The Trustees have adjusted their projections for 2023 and 2034 to be more in line with economic forecasts. At the same time, some experts like Mark Warshawsky, a senior fellow at the American Enterprise Institute (AEI), argue that they may still be too optimistic about the impact of inflation on Social Security funds.
According to a recent survey by Voya Financial, one-third (32%) of Americans aged 65 to 74 are projected to still be working by 2030. This is a significant increase from 2000, when only 19% of individuals in this age group were employed.
Who Can Be Benefited With the Social Security Retirement Plans
Social Security retirement benefits are designed to replace a portion of an individual’s pre-retirement income. The amount of the benefit is based on the individual’s earnings history and the age at which they choose to start receiving benefits.
Social Security retirement benefits are intended to be a supplement to other retirement savings, such as 401(k) plans and individual retirement accounts (IRAs).
These benefits are not intended to fully replace an individual’s pre-retirement income. So, individuals should have additional retirement savings in place to ensure they have enough income to support their retirement years. Practically, any American worker can be benefited by the Social Security retirement plans, but they may comply to certain requirements.
In general, employees who are at least 21 years old and have worked for their employer for a specified period of time (usually between three and 12 months) are eligible to participate in their employer’s 401(k) plan. However, some employers may have different eligibility requirements, so, employees must check with their employer to determine if they are eligible to participate.