The 2012 annual report on the financial status of the Social Security Trust Fund was recently released by the Social Security Board of Trustees. Under the current system, the Board’s long-range projections indicate the combined OASDI (Old-Age and Survivors Insurance and Disability Insurance) Trust Funds may be exhausted in 2033. It’s noteworthy that this projection is 3 years earlier than the Board projected within its 2011 annual report. It is estimated that only 75% of scheduled benefits will be available for recipients once the Trust Funds are exhausted.
The report urges legislators to act soon to increase the program’s solvency and provides the following options for the combined Trust Funds to remain healthy for the full 75-year projection period:
- Permanently increase the payroll tax by 2.61% (split equally at 1.305% each for employee and employer),
- Immediately reduce scheduled benefits by 16.2%,
- Create more revenue, or
- Some combination of these options.
Our view is that Social Security will certainly remain in place, but lawmakers will be forced to make changes eventually – as have occurred in the past – to create long-term stability. These changes will most likely impact younger generations and may consist of increasing the Social Security defined full retirement age, reducing benefits for high income wage earners, increasing the taxability of benefits (currently up to 85% of benefits are subject to federal income tax), raising the amount of income subject to the payroll tax ($110,100 currently), increasing the payroll tax, etc.
The full 242 page report can be found here: www.socialsecurity.gov/OACT/TR/2012/.