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It’s Official: Social Security Will Be Tapped Out in Less Than Twenty Years

The Social Security and Medicare trustees released their annual reports on Wednesday with a simple warning: If Congress does nothing to address the shortfall in funding the Social Security fund deficit will reach critical mass in fewer than twenty years. Medicare is in only slightly better shape, with escalating costs for medication and services pushing the healthcare fund into the red by 2028. Although two decades sound like plenty of time, due to the way government budget cycles work rescuing these funds we’re all relying on will require quick action by Congress.

If Congress does nothing, and they’ve done a lot of nothing over the last few years, that doesn’t necessarily mean Social Security would completely stop sending money. In a worst-case scenario it means they’d only be able to pay around 79% of promised benefits. But in an increasingly shaky world economy that’s hardly comforting news.

What About the Trust Fund?

Social Security is supposed to be entirely self-financing and, in theory, should not impact the federal budget at all. But the Trust Fund, which is supposed to have nearly three trillion dollars in it, is little more than an accounting trick these days. That’s because over the years Congress has “borrowed” the money from the trust fund but never paid it back.  Now that the bill is coming due that same Congress has limited options for making up the shortfall.

Raising Social Security Taxes

Normally Congress would just borrow to pay back the Social Security Trust Fund, but now that plan is running smack into the federal debt ceiling. That leaves Congress with three increasingly ugly options:

  • Raise Social Security taxes between one and three percent
  • Raising the amount of income taxable for Social Security, or
  • Cut benefits

Seniors Up in Arms

Seniors who have paid into Social Security and Medicare their entire working lives understandably balk at the word “entitlement” being applied to their benefits, as if they were some form of government charity. They claim the fact that today’s retirees will get back more than they paid in is not their fault.

The fact is Social Security was never intended to be the sole source of support for those in retirement. But once-reliable pensions have become increasingly rare; while wages have barely kept pace with inflation, limiting our ability to save for retirement, thus forcing more and more Americans to depend on Social Security as their sole means of support.

Political Hot Potato

Republicans in the House passed the Ryan Budget, which put GOP House members on record as supporting the idea of turning Medicare into a voucher program after 2024. Of course, this presupposed there would be a Republican in the White House – which didn’t work out, and Democrats closed ranks against the plan in the Senate.

This year Social Security is a major campaign issue, with Democrats pushing to raise benefits for the most needy seniors and Donald Trump vowing not to make cuts in either Social Security or Medicare. That puts Republicans in down-ticket races in the tricky spot of promising to cut government spending without being able to specify just how they’re going to do it.

Count on Nothing But Yourself

Since nothing is the commodity in greatest supply in Congress, those currently saving for retirement should be skeptical about whether we  can count on Social Security at all. At best those saving toward retirement today should look on it  as a supplement, which was the original intent. With our political system hopelessly deadlocked it’s likely that the needed changes to keep Social Security solvent will get kicked down the road to the very last minute. Seniors and the disabled should be planning on at least temporary cuts as the deadline draws near.

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