New Social Security Report Warns of Worsening Financial Outlook

The Social Security Administration is expected to run dry in eight years, according to a new government report that shows a worsening long-term financial outlook for the government agency.The 2025 Old-Age, Survivors, and Disability Insurance Trustees Report says that its trust fund is projected to have sufficient reserves to pay full benefits on time until 2033. Without legislative action, it will be able to pay only 77 percent of benefits after that.This year’s report says there are three substantial changes that affect projections. A law that went into effect in January increases benefits to 3 million former public-sector workers. The new law repeals a rule that reduced or eliminated the Social Security benefits of individuals receiving a pension based on work that was not covered by Social Security.Secondly, birth rate expectations have dropped. Birth rates are assumed to increase from recent very low levels to an ultimate level of 1.9 children per woman by 2050. That is 10 years later than expectations last year. The lower the birth rate, the fewer people that will contribute to Social Security funding.Finally, the report cites an expected drop in future wages, which would lower the amount of Social Security taxes collected.The fund’s current deficit is 3.82 percent of taxable payroll, which is up from 3.50 percent in last year’s report. The report finds that payroll taxes would have to jump 3.65 percentage points to avoid depleting the fund. That would push the combined rate of collection from employers and employees to 16.05 percent.Another option would be to permanently reduce all current and future benefits by 22.4 percent.The report says a third option is to combine a smaller increase in payroll taxes with a smaller cut in benefits.But the report warns that the longer it takes to take action, the changes necessary to maintain Social Security solvency become concentrated on fewer years and fewer generations.The Committee for a Responsible Federal Budget, a nonprofit organization that tries to educate the public on fiscal policy issues and claims to be bi-partisan, blames Congress.“Seventy million people rely on Social Security and Medicare, and yet our leaders continue to let these programs hurtle toward insolvency,” the president of the committee, Maya MacGuineas, says. “And it’s not just the negligence of letting another year pass — Washington is actively making things worse.”“Congress seems more intent on cutting taxes and scoring political points than rescuing these programs from the brink,” Ms. MacGuineas adds.President Trump has repeatedly promised not to touch Social Security benefits, but more people have been rushing to start collecting payments earlier due to fears the program may be gutted or not be fixed in time to avoid benefit cuts. That is leading to a quicker drawdown in the trust’s funds.The president of left-leaning Social Security Works, Nancy Altman, says one way to help prop up the program would be for high earners to pay more in payroll taxes. Social Security is not taken out of any income above $176,100 this year. Ms. Altman says if individuals paid Social Security taxes on all of their income, it would save the program. “Not only is requiring the wealthy to pay into Social Security on all their income popular, it is also excellent policy,” Ms. Altman says. “Income inequality has cost Social Security more than $1.4 trillion since 1983. If the wealthy pay in on all of their income, including unearned investment income, we can easily afford to protect and expand Social Security’s modest benefits.”

New Social Security Report Warns of Worsening Financial Outlook

New Social Security Report Warns of Worsening Financial Outlook

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