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Is Social Security About to Run Out of Funds?


One of the most popular stories about Social Security is when and if it will run out of money. The lengthy response is difficult. But, in short, unless something unexpected happens, Social Security will not run out of money anytime soon – though future users may have to make do with lesser monthly payments than present recipients.

According to the Urban-Brookings Tax Policy Center, retirement and survivors’ payments are paid from the Old-Age and Survivors Insurance (OASI) Trust Fund, which is primarily supported through payroll taxes.

Payroll taxes also help to fund the Disability Insurance (DI) Trust Fund, which is a separate Social Security program that provides disability benefits.

The combined OASI and DI funds “would be able to pay scheduled benefits in a timely manner until 2035,” according to a 2022 report from the Social Security and Medicare Boards of Trustees, after which the combined funds’ reserves would be depleted.

At this time, payroll tax revenue will only cover around 80% of scheduled benefits rather than all of them.

This shortage will mostly affect the OASI trust fund rather than the DI trust fund. According to the Social Security Administration, the DI fund is no longer expected to be emptied during the 75-year forecast timeframe.

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In terms of the OASI fund, Social Security will not run out of money if the reserve funds are gone. However, the program will have to figure out how to make do with less money while still guaranteeing that Social Security beneficiaries receive the full and timely benefits to which they are legally entitled.

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According to a September assessment from the Congressional Research Service, one alternative would be for Congress to restore fiscal balance by promptly cutting scheduled benefits by nearly 20% to pay for the predicted shortfall. The required reduction would progressively grow to 26% by 2096.

Another alternative would be for Congress to raise the Social Security payroll tax rate from 12.4% to 15.6% after the 2035 depletion, and then progressively increase it to 16.7% by 2095.

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While those choices are still up in the air, additional alternatives have been floated by current members of Congress.The Republican Study Committee unveiled a plan this summer that would realign the Social Security full retirement age (FRA) to account for increases in life expectancy.

This would extend the FRA for Social Security from 66 to 67 years old, theoretically boosting Social Security funds.

Another plan presented by Rep. Peter DeFazio (D-Ore.) and Sen. Bernie Sanders (I-Vt.) would enhance monthly payouts to Social Security recipients while also increasing funds for the program by imposing a Social Security payroll tax on all income above $250,000. Earnings above $147,000 are currently exempt from the Social Security tax.

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