Would you be able to handle a 23% cut on your SS benefit?
Senior payouts started in 1940, and that’s when the Social Security Board of Trustees decided to release a yearly report that examined the financial state of the program.
This famous report takes everything into account: the demographic changes, the congressional modifications to fiscal policy, and many other factors that provide an overview of how strong the foundation of Social Security is over the short term but also over the long term.
The only issue is that the Trustees Report proved a long time ago that providing long-term revenue isn’t enough anymore to cover all the payouts, which include the cost-of-living adjustment (COLA), since 1985, and as time goes by, it only gets worse.
Let’s just say that the 2022 Trustees Report estimated that Social Security will suffer from a $20.4 trillion cash deficit through 2096. However, if there’s any silver lining in this, it’s that Social Security could never go bankrupt, as long as people are still working.
No less than 90% of the revenue collected by the SSA comes from the 12.4% payroll tax applied to earned income, like wages and salaries. Even if Social Security doesn’t represent a danger of insolvency, this still doesn’t mean that it’s financially healthy.
However, without any changes, the Trustees Report foresees the Old-Age and Survivors Insurance Trust Fund, which will be responsible for sending out payments to over 48 million retired workers every month, requiring a 23% benefit cut by 2034. Let’s just say that for the average retired worker, this means thousands of dollars in reduced annual benefits.
