Go ahead and lop another year off of Social Security’s long-term solvency.
The Treasury Department finally released the long-awaited 2021 OASDI Trustees Report on Tuesday, officially called “The 2021 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds.”
Given the circumstances of the past 18 months, the news from this year’s report, which presents the current and projected financial status of the trust funds, is hardly surprising.
From the report’s official summary:
Based on our best estimates, the 2021 reports show:
- The Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivors benefits, will be able to pay scheduled benefits on a timely basis until 2033, one year earlier than reported last year. At that time, the fund’s reserves will become depleted and continuing tax income will be sufficient to pay 76% of scheduled benefits.
- The Disability Insurance (DI) Trust Fund will be able to pay scheduled benefits until 2057, 8 years earlier than in last year’s report. At that time, the fund’s reserves will become depleted and continuing tax income will be sufficient to pay 91% of scheduled benefits.
The OASI and DI funds are separate entities under law, but the report also presents information that combines the reserves of these two funds in order to illustrate the actuarial status of the Social Security program as a whole.
[totalsurvey id=”1″][/totalsurvey]The hypothetical combined OASI and DI funds would be able to pay scheduled benefits on a timely basis until 2034, one year earlier than reported last year. At that time, the combined funds’ reserves will become depleted and continuing tax income will be sufficient to pay 78% of scheduled benefits.
So, either way you look at it, Social Security is on track to become insolvent another year sooner absent action by lawmakers in Washington.
That didn’t stop the political spin machine on Tuesday, after the Social Security Administration officially released the annual reports following a closed meeting of the Social Security and Medicare Boards of Trustees.
“Having strong Social Security and Medicare programs is essential in order to ensure a secure retirement for all Americans, especially for our most vulnerable populations,” Treasury Secretary Janet L. Yellen said. “The Biden-Harris Administration is committed to safeguarding these programs and ensuring they continue to deliver economic security and health care to older Americans.”
Labor Secretary Marty Walsh also chimed in.
“The Biden-Harris Administration’s commitment to building back better isn’t only about roads or bridges, it is also about rebuilding our promise of a secure retirement for America’s workers, retirees and their families,” Walsh said. “As our economy gets healthier, so do the trust funds that sustain Social Security and Medicare. We will continue working to deliver on the promise of financial security in retirement for all of America’s workers.”
Social Security Administration Acting Commissioner Kilolo Kijakazi noted the report includes the best estimates of the effects of the COVID-19 pandemic on Social Security—something last year’s report did not factor in.
“The pandemic and its economic impact have had an effect on Social Security’s Trust Funds, and the future course of the pandemic is still uncertain,” Kijakazi said. “Yet, Social Security will continue to play a critical role in the lives of 65 million beneficiaries and 176 million workers and their families during 2021.”
The COVID-19 pandemic and economic recession are getting much of the blame for moving up the depletion rate by a year thanks to the big drop in employment and resulting decline in revenue from payroll taxes. But Social Security has long known it faces a basic math problem with 10,000 Baby Boomers retiring every day and not enough younger people entering the workforce to replace them and contribute into the program’s coffers.
Within the past two years, Social Security has started to draw down its assets in order to pay retirees all benefits promised. Those monthly payments to beneficiaries now exceed what Social Security payroll taxes and the interest on the trust funds are bringing in, leaving the program to consistently operate in the red.
Chief Actuary Stephen Goss, who also spoke at today’s press conference, said the drop in payroll taxes affect solvency the most, but he noted there was increased mortality (due to COVID-19) that offsets it somewhat.
The average senior on Social Security in 2021 collects $1,543 a month. Cutting that sum by 24% brings the average monthly benefit down to just $1,173, which amounts to $14,072 a year (remember today’s report forecasts OASI beneficiaries would only receive 76% of their scheduled benefits by 2033 absent congressional action).
In 2021, an average of 65 million Americans per month receive a Social Security benefit, totaling over one trillion dollars in benefits paid during the year. Nearly nine out of 10 people age 65 and older receive Social Security benefits, which represent about 33% of the income of the elderly.
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SEE ALSO:
- Pandemic Leads to Big Spike in Social Security Beneficiary Deaths
- Treasury Facing Heat on Overdue Social Security Trustees Report
- CBO Extends Timeline for Social Security Trust Fund Depletion
- 2020 Report: Social Security Combined Trust Funds Projection Unchanged
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.