Reduction of Social Security Payments Slated to Take Place One Year Sooner than Previously Predicted

For the last several decades, experts have warned younger generations about the future of Social Security. The way the demographics have changed in the country over the last century threatens retirement payments for those born after the Baby Boomer generation.

Most financial advisors have warned people of all ages to not count primarily on Social Security payments for retirement. However, the truth of the matter is that several people live off of Social Security as their primary source of income.

And once more money gets paid out of the Social Security fund than goes into it, the money in the trust fund will start to dry up and payments will forcibly get reduced. It seems like every year the Social Security Board of Trustees announces that the date when the trust funds get depleted will arrive sooner and sooner.

Social Security Payments Reduction Slated to Happen Sooner

Last November, The Maverick Observer reported that Social Security’s cash reserves will be depleted by 2034 if no action gets taken by the government between now and then. The trustees’ report in 2021 stated that after 2034 those paying into Social Security would only be able to cover just under 80 percent of the payments that would need to be paid out.

Last March, the Social Security Administration announced that the trust funds would be depleted a year sooner than they had imagined in the report the previous year. This means that the 20 percent reduction in payments is estimated to take place in 2033 instead of 2034.

The Social Security Administration Board of Trustees said in a press release that they continue to push Congress to act on the issue which seems to worsen every year. “The Trustees continue to recommend that Congress address the projected trust fund shortfalls in a timely fashion to phase in necessary changes gradually,” said Kilolo Kijakazi, Acting Commissioner of Social Security.  “Social Security will continue to play a critical role in the lives of 67 million beneficiaries and 180 million workers and their families during 2023.  With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.”

Causes of Fund Depletion

According to the Association of Mature American Citizens (AMAC), retirees seeing Social Security benefits will see a 23 percent reduction in payments after the Social Security Trust Fund gets depleted in 2033. The Trustees’ Report also stated that the disability insurance trust fund will be depleted the following year. The organization’s website reports that if nothing gets done to fix the issue it could turn into “one of the country’s most significant crises.”

An article posted on AMAC’s website explains that under current law when the Social Security program brings in more money than it pays out in benefits, the extra funds can then be loaned to the federal government in an effort to collect interest. Since the year 2011, the benefits paid out to those eligible started to exceed the funds generated by payroll taxes.

Starting in 2021, the benefits paid started exceeding all revenues including the interest incurred on the money loaned to the government. Since that happened, Social Security has been redeeming the bonds and getting back the money loaned to the federal government.

According to a report issued by the Social Security Administration in 2010, the main culprit of less money going into the system has to do with a recent change in the birthrate. American women now have fewer children. At one point in American history, women had an average of three kids, which has since been reduced to two children.

Some say that another cause is that more people are retiring and the amount of younger workers has decreased, as stated in an article published by The Epoch Times. More young people are also not working and living off their parents, the article also states.

In addition, Social Security payments went up by 8.7 percent this year due to record-high levels of inflation. “Payments went from an average of $1,681 to $1,827 per month to about 67 million people and that is why the original shortfall date—originally projected for 2034—has been moved to 2033,” The Epoch Times reported.

What Can Lawmakers Do to Prevent the Social Security Crisis?

One of the main solutions that has been suggested is to raise the age when senior citizens can draw their full Social Security benefits. According to The Epoch Times article, Republicans have proposed raising the age when seniors can collect their full benefits as opposed to partial benefits given to people who choose to retire early from age 67 to 70. But even though this potential solution has been discussed in Congress, the idea has still seen significant opposition.

A second option that has been proposed is to raise the amount of income that is taxable. In 2023, workers paid Social Security taxes on the first $160,200 they made, which was a $13,200 increase from the previous year. Raising that amount could provide the money needed to cover the deficit.

Another option would be to raise the amount of taxes taken out of everyone’s paycheck. The amount could be raised high enough to make up for the Social Security account’s shortfall.

In the end, it has become apparent now more than ever that lawmakers need to do something to attempt to solve the potential Social Security crisis. Expect more discussion on the subject to take place in the coming years.

The Maverick Observer is an online free-thinking publication interested in the happenings in our region. We launched in February 2020 to hold our politicians and businesses accountable. We hope to educate, inform, entertain, and infuse you with a sense of community.