A Social Security Actuary Answers the Big Question About Social Security Solvency
The big question on everyone’s minds these days is “Will Social Security be there for me in the future?” Before that can be answered, it’s important to understand what Social Security is and what “solvency” really means for its future.
Explaining the Social Security Trust Fund
According to a fact sheet put out by the Social Security Administration (SSA), “Social Security is a social insurance program that provides retirement, disability, and survivors benefits to more than 66 million people. The program is funded by payroll taxes known as Federal Insurance Contributions Act, or FICA, paid by workers and their employers.” The FICA tax contributes to the Social Security Trust Funds, which are used to pay monthly benefits. In a nutshell, today’s workers help pay for current retirees’ and other beneficiaries’ benefits.
The Solvency Showdown
The fact sheet also explains that “solvency refers to the ability of the Trust Funds to pay 100 percent of currently scheduled benefits.” This is where there is cause for concern.
The most recent SSA Trustees Report, which provides information about the solvency of the Social Security Trust Funds, projects that the reserves will be depleted in 2034. It cautions that this does not mean that benefits will stop in 2034, stating: “If no action is taken by Congress to ensure the solvency of the Trust Funds, the Social Security program will have enough FICA taxes coming in to pay about 80% of scheduled benefits. Congress has previously acted to ensure the solvency of the Trust Funds and protect Social Security benefits.”
An Actuary’s Answer
So now let’s circle back to that original question: “Will Social Security be there for me in the future?”
The SSA’s Chief Actuary, Steve Goss, answered that question on a recent episode of SSA Talks. During the podcast, he explains what actuaries analyze when making their annual Trustees Report. His message was not all doom and gloom. He was quite encouraging in one aspect, pointing out that Congress has always taken action to secure the trust funds, to ensure everyone receives the benefits to which they’re entitled.
Congress Needs to Act
The time has come for Congress to take action to secure the long-term solvency of Social Security. We must shore up the trust fund before it runs out in the next ten years.
The Seniors Trust wants lawmakers to enact the Social Security Expansion Act. It calls for lifting the cap on Social Security taxes to ensure that the wealthiest Americans pay a fairer amount in relation to their income. The bill’s sponsors say doing so would extend the solvency of Social Security for another 75 years.
Additionally, the Social Security Expansion Act would provide bigger monthly benefits — about $200 on average — and establish a fairer cost-of-living adjustment (COLA).
