The New York Times published an article June 12 discussing the projected Social Security shortfall, breathlessly calling it a “crisis” that is “threatening to undermine a central pillar in the retirement of millions of Americans.” Such rhetoric is unhelpful and essentially just serves the purposes of politicians who just want to justify more tax cuts for the rich by cutting Social Security benefits—benefits that you have been paying for all your working lives.
We reaffirm what we said in this article, which we posted in early May. There is no solvency crisis. The projected shortfalls may reduce benefits by a small percentage, but those shortfalls are easily avoidable.
The Social Security Board of Trustees released their annual report April 24 and it paints a different picture than the alarmists would have you believe. As we wrote in May:
The numbers show that the Social Security system is in relatively decent financial health, currently holding nearly $3 trillion in reserves. The Trustees projected that system can pay all scheduled retirement benefits in full until 2035. After that, it will still be able to pay approximately 80 percent of scheduled benefits. This is a year later than projected last year.
The news is even better for Social Security disability benefits, with the SSDI fund now projected to cover scheduled payouts of full benefits through 2052 and pay roughly 91 percent of scheduled benefits thereafter. Last year’s projection estimated that the SSDI fund would only be able to meet its full obligations until 2032.
The key takeaway is that even with the shortfalls, retirees and the disabled will still receive Social Security checks. More importantly, the whole situation can be avoided with some legislative action. As we said:
These projections are based on funding for the program remaining at current levels. While the report projects funding a shortfall, that shortfall can easily be avoided with modest reforms. For instance, minor tax increases staggered over decades would erase the funding deficit.
Hopefully, the Times article will spur lawmakers to act soon to avoid any shortfalls. But that action should not be to cut benefits. Remember, Social Security is funded through a payroll tax that you have paid your entire working life. It’s your money, don’t let them take it from you!