It’s a little scary to contemplate that Social Security trust funds are projected to be exhausted in the not-too-distant future. But that is the subject recently studied in a 2013 report from the Congressional Research Services (CRS).
If the trust funds cannot pay current expenses out of current income or accumulated assets, they are considered to be exhausted or insolvent, and that means the Social Security trusts funds cannot pay full current benefits on time. The report projects that without change, the trust funds will be insolvent by 2033. And that same year the program is projected to have enough income to pay only about 77% of scheduled benefits. The law provides that any individual who meets the eligibility requirement is entitled to benefits, which means the government is legally obligated to pay benefits to such individuals. If the government fails to pay the benefits provided by law, beneficiaries could take legal action. Insolvency does not relieve the government of its obligation to provide benefits.
The CRS study puts forth various scenarios that might take place in the future regarding Social Security benefit payments. If Congress has the will to act sooner rather than later, the less draconian the required changes necessary to maintain full benefit payments will be. The affect of earlier changes would be spread over a large number of workers and beneficiaries over a longer period of time. And prompt action would also allow Congress to more gradually phase in the necessary changes, rather than waiting until 2033 and abruptly cutting benefits and/or raising taxes. Early action would also make it easier for workers to plan for their retirements.
If Congress waits until 2033 the trust funds’ annual deficit could be eliminated with a cut in benefits of about 23%, rising to 27% by 2087. If Congress acts today, the necessary changes would be about half as large as those needed if Congress waits until the trust funds become insolvent.
Scary, yes. But we should hope for the changes to be made sooner than later.