social security

Social Security Reserves to Be Depleted Earlier than Previously Expected

The annual trustees report, which was released on Tuesday, found that Social Security benefits could be paid in full until 2034.

Social Security’s trust fund will be able to pay full retirement benefits until 2033, one year earlier than predicted in 2020’s report.

At that time, the reserves for the Old-Age and Survivors Insurance Trust Fund, which pays survivor and retirement benefits, will run out and tax revenues will be able to cover 76% of scheduled benefits, according to a summary of the trustees report, which was released on Tuesday.

Additionally, the Disability Insurance Trust Fund, which covers disability payments, is currently able to provide benefits until 2057 before reserves run out. That’s eight years earlier than predicted in the 2020 report. If that happens, tax income will be able to cover 91% of benefits, according to the summary.

The Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund are separate entities but hypothetically, if they were combined, the funds would be able to provide benefits until 2034, one year earlier than previously expected, according to the summary.

The report projected that key factors, such as employment, earnings and interest rates, should gradually rise after a steep drop in the second quarter of 2020 until they fully recover by 2023.

The trustees report also assumed higher mortality rates due to the pandemic through 2023. Immigration and childbearing were expected to fall from predictions in the 2020 report with a potential for an uptick in a few years. These changes to short-term assumptions affected the outlook of the program, though it was difficult to predict the long-term consequences, the summary says. 

“Given the unprecedented level of uncertainty, the Trustees currently assume that the pandemic will have no net effect on the individual long-range ultimate assumptions,” according to the summary of the report. “At this time, there is no consensus on what the lasting effects of the COVID-19 pandemic on the long-term experience might be, if any. The Trustees will continue to monitor developments and modify the projections in later reports.”

Social Security’s trust fund reserves totaled $2.9 trillion at the end of 2020, an increase of $11 billion. 

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The 12 Best Tech Stocks to Buy for 2022
tech stocks

The 12 Best Tech Stocks to Buy for 2022

The best tech-sector picks for the year to come include plays on some of the most exciting emergent technologies, as well as several old-guard mega-ca…
January 3, 2022
How to Know When You Can Retire
retirement

How to Know When You Can Retire

You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually …
January 5, 2022

Recommended

22 Best Retirement Stocks for an Income-Rich 2022
dividend stocks

22 Best Retirement Stocks for an Income-Rich 2022

Ideally, your retirement stocks will help you generate a sizable and reliable income stream. These 22 dividend payers make the grade.
January 21, 2022
12 Questions Retirees Often Get Wrong About Taxes in Retirement
retirement

12 Questions Retirees Often Get Wrong About Taxes in Retirement

You worked hard to build your retirement nest egg. But do you know how to minimize taxes on your savings?
January 21, 2022
14 IRS Audit Red Flags for Retirees
retirement

14 IRS Audit Red Flags for Retirees

Seniors beware: Your actions can increase the chances of the IRS giving your tax return a closer look.
January 21, 2022
A Charitable Trust With Many Benefits for Retirees
Charity

A Charitable Trust With Many Benefits for Retirees

You can use a charitable remainder trust to help support causes you love and leave money to heirs in a way that mimics the old "stretch" IRA.
January 20, 2022