It seems that my whole adult life they have been talking about the Social Security funds running out. I laugh at that, because if it was real money and that money was invested it would never have run out. The damned politicians looked at it as a pork barrel to stick their hands into and spend and spend.
So, Social Security is currently scheduled to exhaust its assets in 2033. (Those assets are an accounting notion, not real dollars. They show how much money socked away the program would have, if the Treasury hadn’t spent surplus revenue on other things in earlier years.)
Legally, once the program uses up its assets, it must cut benefits by 20%. Or, to avoid benefit cuts, Social Security taxes would need to rise from 12.4% (including the employer’s share) to 15.7%. Or, bump up the rate by one percentage point and then apply it to all wages, throwing out the ceiling that kicks in at $160,200.
Whatever the solution future lawmakers choose, it’ll be politically painful: A mix of higher taxes, less generous benefits, a higher retirement age, etc. Medicare Part A is in a similar situation, with the Medicare Trust Fund on tap to run out in 2031. If taxes aren’t raised to cover the gap, benefits will fall by 11%.
What do you think your representatives are going to vote to do?!?