Brett Rowland (Center Square)
The latest projections from the Congressional Budget Office show that the Old Age and Survivors Insurance Trust Fund will be depleted by 2033 if benefits are paid out as planned.
Monthly checks for Social Security beneficiaries rose 8.7% in January, the largest cost-of-living adjustment since 1981. This increase increases beneficiaries’ average monthly benefit by $146. This is expected to raise the average benefit from $1,681 to $1,827, according to the Social Security Administration.
The Disability Insurance Trust Fund will be depleted on the same timeline by 2048, according to the latest report from the federal agency that provides budget and economic information to Congress.
To remain solvent through 2096, the federal government would need to raise the payroll tax rate by 4.9 percentage points immediately and permanently, or reduce benefits, or implement some combination of tax increases and tax cuts.
“After 2096, however, the gap between income and spending will widen and the gap will continue to grow,” the CBO said Report.
If Social Security spending is limited to income payable after the trust fund is depleted in 2033, Social Security benefits will be reduced by about 23% from the planned benefits in 2034. There will be a 35% reduction by 2096, after which the gap will remain stable.
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Social Security is the largest single item in the federal budget, and it has two components. Old age and survivors coverage provides benefits to retired workers, their eligible dependents, and some survivors of deceased workers. Disability insurance provides benefits for disabled workers and their families.
Social Security is funded by payroll taxes and benefit income taxes. Payroll taxes are generally 12.4% of income, up to an annual maximum. By 2022, this amount is $147,000. Employees and their employers each pay half of the 12.4%. According to the CBO, the self-employed pay the full amount. To pay benefits under current law and maintain trust fund balances through 2096 would require an increase from 12.4 percent of taxable wages to 17.3 percent, the report said.
“Other ways to maintain necessary trust fund balances include reducing scheduled benefits by the equivalent of 4.9 percent of taxable wages, or combining tax increases with benefit reductions,” the report states.
According to AARP, many Americans depend on Social Security. AARP research shows that Social Security is the largest source of retirement income for most Americans.It provides almost all income for a quarter of seniors, it says AARP.
Former President Donald Trump said: “Under no circumstances should Republicans vote to cut a penny from Medicare or Social Security to help pay for Joe Biden’s reckless spending spree, larger than any in the history of our country. Anyone who does or does is more reckless,” in a video posted Friday on Truth Social.
Some Republicans said reforms to Social Security and Medicare should be considered, according to media reports. Republican leaders have not embraced those calls.
Syndicated with permission from The Center Square.