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SOCIAL SECURITY WILL BE CRISIS IN 12 YEARS! CANNOT PAY FULL BENEFITS

The Social Security Administration will be unable to pay full benefits to disability and retirement recipients within about 12 years!

 There are 2 Social Security trust funds from which benefits are paid.  One is the Old Age Pension trust fund and the other is the Disability Trust Fund.  Together, these funds had total reserves of about $2.85 trillion at the end of 2021.  However, the funds are paying out more than they take in. The reserves are estimated to be depleted in 2035.

The trust funds get money from 3 sources:

  • 90.1 percent comes from FICA taxes from payroll deductions and employer matches or from the SECA tax paid by self-employed workers.

    3.5 percent is from income tax paid on Social Security benefits.

    6.4 percent is from interest earned on Social Security's trust fund holdings.

    Here's the problem:  Baby boomers are living longer and collecting benefits longer.  Fewer younger workers are getting jobs and paying into the trust funds.  So, the reserve funds shrink every year.

    So, what happens in 2035 when there are no longer reserves in the trust funds?

    At that point, Social Security must pay out in benefits only the money it takes in each year.  According to the 2021 report, current recipients would continue to get about 80 percent of their entitled benefits.

    Politicians dally with ideas to fix the problem. In reality, only 2 fixes are possible:

    One, increase taxes to increase the amount of money the trust funds bring in each year.

    Two, mess with the benefit calculations so that less money is paid out in benefits each year.

    Or, come up with some combination of these two ideas.

    The bottom line:  Social Security isn't going away.  But starting at least by 2035, beneficiary payments may be reduced by 25 percent.

    It's a big problem and made worse by the fact that it can only be solved by politicians who must get reelected.  Social Security is a hot potato that frightens politicians because so many of them have been burned by it.  If you want to end a politician's career, just accuse him/her of "voting to cut Social Security."  So, Washington quivers in fear as the trust funds shrink.

    2022 Social Security Report

 

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