Skip to content
COVID19 has created Social Security Benefits Funding Problems …
In 2009 the Chief Actuary of the Social Security Administration reported on The Future Financial Status of the Social Security Program *(published by by Stephen C. Goss in Social Security Bulletin, Vol. 70, No. 3, 2010
“Currently, the Social Security Board of Trustees projects program cost to rise by 2035 so that taxes will be enough to pay for only 75 percent of scheduled benefits. This increase in cost results from population aging, not because we are living longer, but because birth rates dropped from three to two children per woman. Importantly, this shortfall is basically stable after 2035; adjustments to taxes or benefits that offset the effects of the lower birth rate may restore solvency for the Social Security program on a sustainable basis for the foreseeable future. Finally, as Treasury debt securities (trust fund assets) are redeemed in the future, they will just be replaced with public debt. If trust fund assets are exhausted without reform, benefits will necessarily be lowered with no effect on budget deficits.“
“As a result of changes to Social Security enacted in 1983, benefits are now expected to be payable in full on a timely basis until 2037, when the trust fund reserves are projected to become exhausted.1 At the point where the reserves are used up, continuing taxes are expected to be enough to pay 76 percent of scheduled benefits.
Thus, the Congress will need to make changes to the scheduled benefits and revenue sources for the program in the future.
The Social Security Board of Trustees project that changes equivalent to an immediate reduction in benefits of about 13 percent, or an immediate increase in the combined payroll tax rate from 12.4 percent to 14.4 percent, or some combination of these changes, would be sufficient to allow full payment of the scheduled benefits for the next 75 years.”
To mitigate the exhausting of funds Congress has already taken the step of increasing Payroll Tax to 15.65% – which on the face of it should be adequate to ensure continuation of full benefits.
However that was the status Pre-Coronavirus Pandemic.
The Economic Impact of Covid19 has been a massive increase in Unemployment, Bankruptcy of Iconic Enterprises & Folding of many Small Businesses, and a forecasted decline in GDP.
All of which will negatively impact on Tax Revenue collections for some years. *(Some say there will be Economic reverberations for 10 years)
What might COVID19 mean in respect of the solvency and sustainabity for the Social Security Benefits Program?
What might that mean for your Retirement?