April 26, 2020
Social Security’s Future Projections from 2020 Annual Report
Social Security reports on its financial outlook and the future impact on benefit recipients.
Every year, Social Security’s Board of Trustees reports on the long-term financial status of the program and the impact on benefits. They announced on April 22, 2020 that the projections did not change from last year. The combined asset reserves of Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) are projected to be depleted in 2035, with 79 percent of benefits payable at the time.
- OASI Trust Fund is projected to become depleted in 2034, with 76 percent of benefits payable at that time.
- DI Trust Fund is projected to become depleted in 2065—extended 13 years from last year’s estimate—with 92 percent benefits payable.
Regarding today’s current events, the projections did not take into account COVID-19 effects on businesses and employment.
How does COVID-19 Impact the future Social Security benefits?
The Labor Department continues to report that more Americans filed for unemployment benefits—reflecting that at least one-sixth of Americans are now unemployed. As more people are unemployed, they are looking for other means of income which may include electing Social Security benefits early, if they’ve reached retirement age.
However, Andrew Saul, Commissioner of Social Security advises, “The duration and severity of the pandemic will affect the estimates presented in this year’s report and the financial status of the program, particularly in the short term.”
What will the Social Security projections look like in 2021?
It is projected that in 2021, the cost of the Social Security program will exceed the total annual income, for the first time since 1982. Beyond 2021, the Board of Trustees advises the government to make changes before 2035 to sustain Social Security benefits.
What will happen to me if I am retired and I depend on my benefits?
It is highly unlikely that current Social Security recipients will have their benefits reduced. In other words, you don’t need to add another worry during these uncertain times. The best thing to do is to take care of your mental and physical health by staying indoors and practicing social distancing.
What will happen if I plan to retire in the future?
For those thinking about retirement, there are many different proposed fixes for Social Security with different potential impacts on your retirement. For example, some of the most discussed proposals include:
- Raising the full retirement age to 68 – if the full retirement age was increased by two months each year starting in 2023 until it reached 68 in 2028, this would fill 16 percent of the funding gap.
- Increasing the Payroll Tax Cap – if the Social Security payroll tax, which currently applies only earnings up to $118,500, was applied to earnings above $118,500, additional revenue to support benefits would be generated.
- Reducing benefits for higher lifetime earners – by using a sliding scale to reduce the benefits most for higher earners, make smaller changes for middle earners and make no benefit changes for lower earners, Social Security could fill a portion of the funding gap.
Keep in mind that Social Security remains the largest retirement asset for most Americans so we expect policymakers to be focused on efforts to ensure retirement security and the health of the Social Security trust fund.