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Social Security Trust Fund to Run Out of Money in 2032, a Year Sooner Than Expected
By Adam Hardy MONEY RESEARCH COLLECTIVE
If Social Security’s trust funds were fully depleted, the result would be a roughly 20% across-the-board cut in benefits.
The coffers that fund Social Security’s retirement payments are running dry faster than expected.
An economic outlook released Wednesday by the nonpartisan Congressional Budget Office has determined that Social Security’s Old Age and Survivors Insurance trust fund will become insolvent by 2032, one year sooner than last estimated.
This impacts one of two major trust funds that fuels Social Security payments. The dwindling reserve is earmarked for benefits to retirees and immediate family members of deceased workers, accounting for over 62 million Americans, or about 90% of all Social Security beneficiaries. The remaining beneficiaries receive disability benefits funded by a separate trust.
Still, they could ultimately be impacted, too. If Social Security’s retirement trust were to become insolvent, the remaining trust fund would be used to bankroll all benefits, and it would last only one year before running dry, as well.
But experts say that’s a pretty big if — and the financial woes besetting Social Security sound a lot scarier than they really are.
Is Social Security really going bankrupt?
About a third of Americans say they believe Social Security won’t be there for them when they retire, according to a December survey from the CATO Institute, a libertarian think tank.
These fears are stoked by the idea that Social Security is going bankrupt. But economist Stephen Nuñez argues that the word “bankrupt” is misleading and isn’t a good way to think about what’s happening with Social Security.
“There is no bankruptcy or collapse in the cards,” Nuñez, an economic director at the liberal-leaning Roosevelt Institute, wrote in a recent report.
That’s because, experts say, even if Social Security’s trust funds were fully depleted, about 80% of Social Security benefits would continue to flow because they are funded in real time through payroll taxes. And that scenario assumes Congress ignores the issue.
“Even if nothing is done, people will continue to receive the bulk of their benefits,” Alicia Munnell, founder of the Center for Retirement Research at Boston College, wrote last May. “No one, however, wants to see an immediate 20% across-the-board benefit cut in Social Security retirement benefits.”
Social Security is extremely popular regardless of political affiliation, leading Nuñez to find it unlikely that lawmakers will simply let Social Security fall into insolvency.
He noted that Social Security faced a similar shortfall in the 1980s, and lawmakers rallied to pass reforms in 1983. Those changes were supposed to ensure decades of financial stability until 2058. However, the Great Recession and increased income inequality have changed the calculus the reforms were built upon, and Social Security is in need of a legislative tweak again.
Some popular fixes include subjecting wages over $400,000 to the payroll tax, gradually increasing the retirement age and reducing benefits for top earners.
Nuñez said finding the best fix — “rather than predictions of doom and gloom” — should be the focus.
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Adam Hardy is Money's lead data journalist. He writes news and feature stories aimed at helping everyday people manage their finances. He joined Money full-time in 2021 but has covered personal finance and economic topics since 2018. Previously, he worked for Forbes Advisor, The Penny Hoarder and Creative Loafing. In addition to those outlets, Adam’s work has been featured in a variety of local, national and international publications, including the Asia Times, Business Insider, Las Vegas Review-Journal, Yahoo! Finance, Nasdaq and several others. Adam graduated with a bachelor’s degree from the University of South Florida, where he studied magazine journalism and sociology. As a first-generation college graduate from a low-income, single-parent household, Adam understands firsthand the financial barriers that plague low-income Americans. His reporting aims to illuminate these issues. Since joining Money, Adam has already written over 300 articles, including a cover story on financial surveillance, a profile of Director Rohit Chopra of the Consumer Financial Protection Bureau and an investigation into flexible spending accounts, which found that workers forfeit billions of dollars annually through the workplace plans. He has also led data analysis on some of Money’s marquee rankings, including Best Places to Live, Best Places to Travel and Best Hospitals. He regularly contributes data reporting for Best Colleges, Best Banks and other lists as well. Adam also holds a multimedia storytelling certificate from Poynter’s News University and a data journalism certificate from the Investigative Reporters and Editors (IRE) at the University of Missouri. In 2017, he received an English teaching certification from the University of Cambridge, which he utilized during his time in Seoul, South Korea. There, he taught students of all ages, from 5 to 65, and worked with North Korean refugees who were resettling in the area. Now, Adam lives in Saint Petersburg, Florida, with his pup Bambi. He is a card-carrying shuffleboard club member.