Latest news with #SocialSecurityTrustees
CNET
10 hours ago
- Business
- CNET
Social Security's Crisis Point Is Coming Up Fast. Here's the Latest
Social Security reserves are drying up faster than expected. Here's what you should know. Getty Image/ Zooey Liao/ CNET Millions of Americans rely on Social Security as supplementary income, and for many, it's their lifeline. According to the latest annual report from the Social Security Trustees, the program is in worse shape than expected just months ago, with trust fund reserves now projected to run out a year earlier -- in 2034. To be clear, monthly Social Security payments will still go out, but recipients could see nearly a 25% cut in benefits. That's troubling, especially for those who rely on it as their main income source. Turning things around would require swift action from lawmakers. The overarching issue for the Social Security program is that it's paying out more money than it's receiving from the current workforce, a situation known as an actuarial deficit. The annual report details some of the reasons that the trustees project the trust funds to run out sooner than expected, including lower birthrates and newly implemented initiatives like the Social Security Fairness Act. The annual report is an important health check on the current state of the Social Security program, but it also lays the groundwork for policymakers to make funding changes -- reducing the potential harm to those who rely on monthly payments, many of whom are already struggling financially. Below, we'll go over some of the details found in the report, including the reasoning for the updated projections and what it means for you if Social Security can't continue to pay full benefits to recipients -- or when the trust funds become "insolvent." For more, here's what you should know about paper Social Security checks going away. How is Social Security funded anyway? Social Security is funded through a dedicated payroll tax, meaning that employers and employees each pay 6.2% of wages up to the taxable maximum for the given year. For 2025, the maximum is $176,100. If you're self-employed, your tax rate is doubled to 12.4%. The dedicated tax dollars go to the Social Security trust funds -- comprising the Old-Age and Survivors Insurance and the Federal Disability trust funds -- which are managed by the US Treasury and used to pay retirement, disability and survivor benefits. Any surplus is invested in special government securities. The main issue is with the OASI trust fund, which is expected to be depleted in 2033 -- at which point it will only be able to pay about 77% of scheduled benefits. The DI trust fund reserves aren't expected to be depleted within the 75-year period that ends in 2099. What's causing the Social Security fund to run out of money? Social Security is running out of funds for a number of reasons. However, a major factor is the growing number of Baby Boomers retiring compared to the size of the current workforce, which can't pay in enough to keep the Social Security fund solvent. In addition to the growing number of retirement applications, the Social Security Fairness Act, which went into effect in January of this year, has further strained the program. The act repeals two provisions that previously prevented certain types of public workers from receiving benefits. With those provisions out of the way, Social Security is responsible for ongoing payments and billions of dollars in back payments for qualifying individuals. Another factor is the growing actuarial deficit, which has widened since the 2024 annual report that had projected insolvency in 2035. The actuarial deficit is the difference between the Social Security's payment obligations versus the flow of money into the Social Security trust fund. Last year, the deficit was 3.50%, where it has since grown to 3.82%. These deficit projections are based on government estimates extending through the end of the century. The latest annual report also took into account lower birthrates for a longer period of time compared to last year's report and how much labor contributes to the GDP. What would it take to make Social Security solvent? Closing the gap and making the Social Security program solvent would require a cut to benefits, a permanent increase to the payroll tax or a combination of the two. The annual trustees report lays out potential paths to make Social Security solvent until 2099. One path would be to introduce an immediate, permanent payroll tax hike of 3.65% to be shared between employers and employees. Another path would be to immediately and permanently cut all scheduled and future Social Security benefits by 22.4%. What happens after the Social Security fund becomes insolvent? If nothing is put in place to fill the gap for Social Security funds, 2034 will be a tough year for many. It's important to remember that Social Security payments won't suddenly stop -- but they will be reduced. After the Social Security trust funds are depleted, existing payroll deductions will still be able to pay up to 81% of benefits. For more, be sure to check out the Social Security and SSDI cheat sheet.
Yahoo
5 days ago
- Business
- Yahoo
How Likely Are Social Security Cuts? Here's the Latest Update.
The Social Security Trustees just moved up the timeline for the program's trust fund depletion date. Benefit cuts could now be on the table within a decade. Lawmakers have managed to prevent Social Security cuts in the past, but it's unclear to what they'll be able to pull off this time around. The $23,760 Social Security bonus most retirees completely overlook › Because so many older Americans rely heavily on Social Security to make ends meet, the idea of the program going broke is incredibly scary. Thankfully, though, that scenario is not on the table. Social Security can't run out of money, simply because it gets most of its revenue from payroll taxes. So as long as there's an active labor force, the program can continue to exist. That said, Social Security is facing a funding shortfall that could result in benefit cuts. And the timing of that shortfall just got a little worse. Even though Social Security is continuously funded by payroll taxes, in the coming years, as baby boomers retire in droves, that revenue stream is expected to shrink. And it won't provide Social Security with enough income to keep up with its payment obligations. Social Security can use its trust funds to keep paying benefits while the money is still there. But once those trust funds are emptied, benefit cuts will be on the table. Meanwhile, the Social Security Trustees just released their annual report, and it found that the program's trust funds may be depleted sooner than expected. That's not good news. The Old-Age and Survivors Insurance Trust Fund could be empty by 2033, at which point only 77% of Social Security benefits would be payable. The Disability Insurance Trust Fund could be empty by 2034. From there, 81% of the combined benefits would be payable by Social Security. But that's a pretty serious pay cut for seniors. As it is, many seniors struggle to cover their expenses on Social Security. If benefits are slashed, retirees could be in for a world of financial pain. This isn't the first time in Social Security's history that the program has faced the possibility of benefit cuts. And in the past, lawmakers have managed to come up with solutions for preventing them. But it's hard to say whether Social Security cuts will be preventable this time around. While there are potential solutions, each one introduces a different sort of problem. Some lawmakers have suggested raising the Social Security tax rate. Currently, that tax rate is 12.4% on wages up to a certain cap, split evenly between employers and employees (though self-employed people pay the entire 12.4%). Lawmakers could increase that tax rate, but that would clearly burden working Americans. It's also possible to raise or eliminate the Social Security wage cap so that higher earners pay into the program on more of their income. The problem, though, is that Social Security is designed to reward people who put more money into the program with larger benefits. If the wage cap is lifted and the program's maximum monthly benefit stays the same so there's a net financial gain, it changes the nature of Social Security. There's also the possibility of pushing full retirement age back a year or two. Right now, it's 67 for anyone born in 1960 or later. That change, however, could force many working Americans into a later retirement than what they want or can handle physically. The fact that Social Security is facing cuts in less than a decade demands lawmakers' attention. And at this point, it's a situation that needs to be prioritized. It's very possible to prevent Social Security from cutting benefits -- but only if lawmakers act quickly. Given what's on the line, we can only hope that they'll manage to beat the ticking clock and spare Social Security recipients a world of financial pain. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. How Likely Are Social Security Cuts? Here's the Latest Update. was originally published by The Motley Fool Sign in to access your portfolio
Yahoo
5 days ago
- Business
- Yahoo
How Likely Are Social Security Cuts? Here's the Latest Update.
The Social Security Trustees just moved up the timeline for the program's trust fund depletion date. Benefit cuts could now be on the table within a decade. Lawmakers have managed to prevent Social Security cuts in the past, but it's unclear to what they'll be able to pull off this time around. The $23,760 Social Security bonus most retirees completely overlook › Because so many older Americans rely heavily on Social Security to make ends meet, the idea of the program going broke is incredibly scary. Thankfully, though, that scenario is not on the table. Social Security can't run out of money, simply because it gets most of its revenue from payroll taxes. So as long as there's an active labor force, the program can continue to exist. That said, Social Security is facing a funding shortfall that could result in benefit cuts. And the timing of that shortfall just got a little worse. Even though Social Security is continuously funded by payroll taxes, in the coming years, as baby boomers retire in droves, that revenue stream is expected to shrink. And it won't provide Social Security with enough income to keep up with its payment obligations. Social Security can use its trust funds to keep paying benefits while the money is still there. But once those trust funds are emptied, benefit cuts will be on the table. Meanwhile, the Social Security Trustees just released their annual report, and it found that the program's trust funds may be depleted sooner than expected. That's not good news. The Old-Age and Survivors Insurance Trust Fund could be empty by 2033, at which point only 77% of Social Security benefits would be payable. The Disability Insurance Trust Fund could be empty by 2034. From there, 81% of the combined benefits would be payable by Social Security. But that's a pretty serious pay cut for seniors. As it is, many seniors struggle to cover their expenses on Social Security. If benefits are slashed, retirees could be in for a world of financial pain. This isn't the first time in Social Security's history that the program has faced the possibility of benefit cuts. And in the past, lawmakers have managed to come up with solutions for preventing them. But it's hard to say whether Social Security cuts will be preventable this time around. While there are potential solutions, each one introduces a different sort of problem. Some lawmakers have suggested raising the Social Security tax rate. Currently, that tax rate is 12.4% on wages up to a certain cap, split evenly between employers and employees (though self-employed people pay the entire 12.4%). Lawmakers could increase that tax rate, but that would clearly burden working Americans. It's also possible to raise or eliminate the Social Security wage cap so that higher earners pay into the program on more of their income. The problem, though, is that Social Security is designed to reward people who put more money into the program with larger benefits. If the wage cap is lifted and the program's maximum monthly benefit stays the same so there's a net financial gain, it changes the nature of Social Security. There's also the possibility of pushing full retirement age back a year or two. Right now, it's 67 for anyone born in 1960 or later. That change, however, could force many working Americans into a later retirement than what they want or can handle physically. The fact that Social Security is facing cuts in less than a decade demands lawmakers' attention. And at this point, it's a situation that needs to be prioritized. It's very possible to prevent Social Security from cutting benefits -- but only if lawmakers act quickly. Given what's on the line, we can only hope that they'll manage to beat the ticking clock and spare Social Security recipients a world of financial pain. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. How Likely Are Social Security Cuts? Here's the Latest Update. was originally published by The Motley Fool Sign in to access your portfolio
Yahoo
07-06-2025
- Business
- Yahoo
5 Social Security Changes Experts Predict Could Come in the Next Decade
Social Security has long served as a financial safety net for millions of Americans, but the program faces increasing pressure. Read More: Trending Now: 'Social Security is at a bit of a crossroads,' Paul Miller, managing partner and CPA at Miller and Company, LLP, wrote in an email. According to the latest projections from the Social Security Trustees, the trust fund that helps pay benefits is expected to be depleted by the mid-2030s unless changes are made. 'Now, that doesn't mean Social Security will disappear, but it does mean that if nothing is done, future benefits could be reduced by roughly 20% or more,' Miller added. 'That's a big deal, especially for retirees who rely heavily on these payments.' Here are some Social Security changes experts predict could come over the next decade. Full retirement age (FRA) is the age at which you'll receive your full Social Security retirement benefit you've earned based on your work history. According to the Social Security Administration, the current full retirement age is 67 for those born in 1960 or later. 'We may see the FRA increase from 67 to 68 or beyond for younger workers,' Miller claimed. 'This would reduce long-term payouts without cutting current retirees' benefits directly.' There have been proposals to raise the FRA, but nothing has been enacted into law, at least as of yet. One option analyzed by the Congressional Budget Office would gradually raise the FRA from 67 to 70 by increasing it two months per birth year for workers born between 1964 and 1981. Under this proposal, anyone born in 1981 or later would have an FRA of 70. Workers could still choose to claim benefits as early as age 62, but doing so would result in a steeper reduction in monthly payments than under current law. Find Out: 'Higher-income earners might face increased payroll taxes or see more of their benefits taxed,' Miller wrote. 'Currently, only wages up to $168,600 (in 2024) are subject to Social Security tax. Congress could raise or eliminate that cap.' This cap, known as the taxable maximum, means that any wages above the threshold aren't taxed for Social Security purposes. One proposed solution is to raise that threshold or remove it altogether so that top earners contribute more to the system. Another option is to increase the Social Security tax rate. 'Increase the SS tax rate from 6.2% (which applies to employers and employees) to a higher amount,' Ash Ahluwalia, managing director and head of Social Security planning at OneTeam Financial, wrote in an email. 'This increase in taxes could generate an immediate increase to SS tax revenue.' The SSA uses a specific formula to calculate your benefit amount based on 'average indexed monthly earnings' and age at retirement. 'Lawmakers could revise the benefit formula to be less generous for high earners, while preserving or even enhancing benefits for lower-income retirees,' Milled noted. Each year, the SSA increases Social Security benefits by a certain percentage to counteract inflation. For 2025, the SSA announced a COLA of 2.5%, translating to an average increase of $48 per month. 'There may be changes to how COLAs are calculated, possibly switching to a different inflation measure, like the chained CPI, which typically grows more slowly,' Miller remarked. According to Ahluwalia, Social Security could save millions of dollars by eliminating ongoing increases in Social Security benefits due to COLA. The agency could also make changes to other parts of the Social Security system, such as the reduction or elimination of spousal benefits, ex-spousal benefits, child benefits and child-in-care benefits or other Social Security benefits. 'Similar changes have happened in the past,' Ahluwalia noted, such as the elimination of filing and suspending, which was a strategy where a worker voluntarily suspends receiving benefit payments at or after their full retirement age. 'So it's possible that SS could reduce what some people may perceive as 'loopholes' in the SS code,' he added. More From GOBankingRates 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025 I'm a Retired Boomer: 6 Bills I Canceled This Year That Were a Waste of Money Mark Cuban Tells Americans To Stock Up on Consumables as Trump's Tariffs Hit -- Here's What To Buy This article originally appeared on 5 Social Security Changes Experts Predict Could Come in the Next Decade Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
07-06-2025
- Business
- Yahoo
5 Social Security Changes Experts Predict Could Come in the Next Decade
Social Security has long served as a financial safety net for millions of Americans, but the program faces increasing pressure. Read More: Trending Now: 'Social Security is at a bit of a crossroads,' Paul Miller, managing partner and CPA at Miller and Company, LLP, wrote in an email. According to the latest projections from the Social Security Trustees, the trust fund that helps pay benefits is expected to be depleted by the mid-2030s unless changes are made. 'Now, that doesn't mean Social Security will disappear, but it does mean that if nothing is done, future benefits could be reduced by roughly 20% or more,' Miller added. 'That's a big deal, especially for retirees who rely heavily on these payments.' Here are some Social Security changes experts predict could come over the next decade. Full retirement age (FRA) is the age at which you'll receive your full Social Security retirement benefit you've earned based on your work history. According to the Social Security Administration, the current full retirement age is 67 for those born in 1960 or later. 'We may see the FRA increase from 67 to 68 or beyond for younger workers,' Miller claimed. 'This would reduce long-term payouts without cutting current retirees' benefits directly.' There have been proposals to raise the FRA, but nothing has been enacted into law, at least as of yet. One option analyzed by the Congressional Budget Office would gradually raise the FRA from 67 to 70 by increasing it two months per birth year for workers born between 1964 and 1981. Under this proposal, anyone born in 1981 or later would have an FRA of 70. Workers could still choose to claim benefits as early as age 62, but doing so would result in a steeper reduction in monthly payments than under current law. Find Out: 'Higher-income earners might face increased payroll taxes or see more of their benefits taxed,' Miller wrote. 'Currently, only wages up to $168,600 (in 2024) are subject to Social Security tax. Congress could raise or eliminate that cap.' This cap, known as the taxable maximum, means that any wages above the threshold aren't taxed for Social Security purposes. One proposed solution is to raise that threshold or remove it altogether so that top earners contribute more to the system. Another option is to increase the Social Security tax rate. 'Increase the SS tax rate from 6.2% (which applies to employers and employees) to a higher amount,' Ash Ahluwalia, managing director and head of Social Security planning at OneTeam Financial, wrote in an email. 'This increase in taxes could generate an immediate increase to SS tax revenue.' The SSA uses a specific formula to calculate your benefit amount based on 'average indexed monthly earnings' and age at retirement. 'Lawmakers could revise the benefit formula to be less generous for high earners, while preserving or even enhancing benefits for lower-income retirees,' Milled noted. Each year, the SSA increases Social Security benefits by a certain percentage to counteract inflation. For 2025, the SSA announced a COLA of 2.5%, translating to an average increase of $48 per month. 'There may be changes to how COLAs are calculated, possibly switching to a different inflation measure, like the chained CPI, which typically grows more slowly,' Miller remarked. According to Ahluwalia, Social Security could save millions of dollars by eliminating ongoing increases in Social Security benefits due to COLA. The agency could also make changes to other parts of the Social Security system, such as the reduction or elimination of spousal benefits, ex-spousal benefits, child benefits and child-in-care benefits or other Social Security benefits. 'Similar changes have happened in the past,' Ahluwalia noted, such as the elimination of filing and suspending, which was a strategy where a worker voluntarily suspends receiving benefit payments at or after their full retirement age. 'So it's possible that SS could reduce what some people may perceive as 'loopholes' in the SS code,' he added. More From GOBankingRates 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025 I'm a Retired Boomer: 6 Bills I Canceled This Year That Were a Waste of Money Mark Cuban Tells Americans To Stock Up on Consumables as Trump's Tariffs Hit -- Here's What To Buy This article originally appeared on 5 Social Security Changes Experts Predict Could Come in the Next Decade Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
