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Yahoo
3 days ago
- Business
- Yahoo
What Might Social Security Look Like in 2050?
Social Security is the most expensive program in America's budget. According to the Peter G. Peterson Foundation, it accounts for one-fifth of federal spending. With daunting words like 'privatization' and 'insolvency' now part of the national debate on this perennially hot-button issue, millions of retirees, future retirees, disabled people, spouses, survivors and employees are paying into a system that they fear might not be there for them when it's their time to collect. This article uses current statistics, historical data and future projections to imagine what America's most important social program might look like 25 years from now, in 2050. Find Out: Read Next: COLAs Alone Could Boost Benefits by Nearly 90% According to the Social Security Administration (SSA), the average annual cost-of-living adjustment (COLA) — required by law to ensure benefits keep pace with inflation — has been 2.6% over the last decade. Presuming that remains unchanged for the next 25 years, annual COLAs will have boosted monthly benefit payments by nearly 89% by 2050. Learn More: The Average Monthly Check Could Grow by More Than $1,750 According to the SSA, the average monthly Social Security retirement benefit is $1,976 in 2025. With COLAs projected to increase by roughly 89% between now and 2050, based on the current average annual adjustment, the average monthly check would grow to $3,734.64 in 25 years, for a combined increase of $1,758.64 per month. Without Action, Checks Will Be Smaller, Not Bigger The SSA's own data show that the trusts that partially fund Social Security are on pace to be depleted by 2033, leaving only incoming payroll taxes to pay benefits. The SSA writes that starting then, the agency will be able to pay only 77% of promised benefits. Only congressional action could prevent this pending depletion and shortfall — and the country has been here before. In 1983, lawmakers reformed the system and prevented a similar calamity just months before it would have arrived. However, according to Brookings, the currently pending crisis is at least double that which President Ronald Reagan faced during his first term. Those Who Most Need Benefits Will Claim Earlier, Get Less The potential congressional reforms to prevent insolvency in 2033 might include reducing benefits, raising payroll taxes, extending the full retirement age or some combination of the three. The precise remedy is impossible to guess, but the SSA's 2024 Research, Statistics and Policy Analysis report predicts a bleak outcome for lower-income households in 2050, no matter what action lawmakers take to keep the program afloat. Out of necessity, lower-earning households will be much more likely to start taking benefits at 62, the earliest age of eligibility. Recipients who claim benefits at 62 will have higher poverty rates than those who claim at 63 or older. Not only will those who claim at 62 be disproportionately low-income, but they'll have lower median benefits than those who can afford to wait. More From GOBankingRates New Law Could Make Electricity Bills Skyrocket in These 4 States I'm an Economist: Here's When Tariff Price Hikes Will Start Hitting Your Wallet 5 Strategies High-Net-Worth Families Use To Build Generational Wealth 3 Reasons Retired Boomers Shouldn't Give Their Kids a Living Inheritance (And 2 Reasons They Should) This article originally appeared on What Might Social Security Look Like in 2050? Sign in to access your portfolio
Yahoo
13-07-2025
- Business
- Yahoo
How rising national debt can affect your finances
On July 4, President Trump signed his 'big, beautiful' domestic policy bill, enacting a new wave of tax cuts estimated to add $3 trillion to $4 trillion to the national debt. While the national debt may be hard to conceptualize, economists say its explosive growth has the potential to have major impacts on the economy that will be felt even by individuals. 'I liken it to a boa constrictor squeezing its prey — the debt is slowly doing the same to the American economy,' said Brett Loper, executive vice president of policy at the Peter G. Peterson Foundation, which commissioned a number of recent reports on the national debt. 'The squeeze comes in the form of slower growth, less job creation, higher costs of borrowing for consumers buying homes, or businesses investing in equipment. All of these are consequences.' Learn more: 2025 housing market: Is it a good time to buy a house? Apart from the tax legislation's predicted impact, the total debt has nearly tripled in the last 20 years, from $12.26 trillion in 2004 to $35.46 trillion in 2024, per data from the U.S. Treasury. A slow and steady rise began in the 1980s and was accelerated by the 2008 financial crisis and Great Recession after a period of relative stagnation post-World War II. At the same time, the debt-to-GDP ratio, comparing the size of the debt to the U.S. gross domestic product, has continued to grow, first reaching 100% in 2013 and up to 123% last year. The ratio had not ticked above 100% since right after World War II. The total amount the U.S. government is spending on interest has also continued to make up a bigger percentage of overall expenditures, from 8% in fiscal year 2019 to 13% in FY 2024, per numbers from the U.S. Government Accountability Office. In 2024, net interest was the third-largest federal spending category, at $881.7 billion, after Social Security and other federal healthcare. To put it in simple terms, the U.S. national debt is the difference between the amount of money the federal government is bringing in through taxes and other revenue versus the total amount of budgeted federal spending, in addition to deficits from previous years, said Steven Kyle, associate professor of applied economics and management at Cornell University. Part of the increase in recent years is attributable to the COVID-19 pandemic, which ushered in a variety of special spending, as well as the regular drivers, including entitlement programs like Medicaid and Medicare, defense spending, and high interest on the debt itself, said University of Pennsylvania Wharton School professor of finance Itamar Drechsler. Increasing costs to maintain Medicare and Social Security, due to an aging population and the rising price of healthcare, have also helped drive up the national debt. While much has been made about the debt-to-GDP ratio in recent years, Kyle notes that there's no exact percentage that indicates instability. Japan's ratio, for example, was at almost 250% in 2023, yet that nation is not considered to be in an insecure economic position. 'There is no magic level for that number that means a crisis,' Kyle said. '... The problem we're having right now is that people are doubting that the economic managers of the United States are serious people and that they're actually trying to address this.' What is clear, according to Kyle, is that one way to address an increase in government spending would be a boost in revenue through higher taxes. But in this current political atmosphere, that almost certainly won't happen. 'On the revenue side, one where you are not allowed to utter the word tax, we have not been getting the revenue we need to cover the gap,' Kyle said. 'And, therefore, we've been accumulating national debt in good times and bad.' While what Kyle calls the 'huge borrowing spree' of the pandemic was largely 'unavoidable,' the last few years could have been used to right the financial ship. The national debt is projected to top $52 trillion by 2035, according to the Congressional Budget Office — an estimate reached before Trump's tax cuts were enacted Using a 2055 scenario in which the debt-to-GDP ratio is at 156%, the Peterson Foundation published an analysis which found that the current path of debt could reduce the size of the economy by $340 billion in 2035, shrink the number of U.S. jobs by 1.2 million, and bring wages down by 0.6% relative to having an unchanged national debt. A 2025 Yale Budget Lab report showed that a permanent deficit increase of 1% of GDP would lead, after five years, to consumers paying $60 more in annual auto loan interest, $600 more in annual mortgage interest, and about $1,000 more for small business loan interest. The general tone of a continually rising national debt and debt-to-GDP ratio is some level of doom. 'What happens when everybody gets nervous?' Kyle said. 'Consumers don't buy things, investors don't invest in new productivity capacity because they don't know what their profit margin is going to be next year. We get a recession, and that can affect people.' Read more: How to recession-proof your money Here are some other specific ways individuals could be impacted by rising national debt. According to the Peterson analysis, the number of U.S. jobs could decrease by as much as 1.2 million in 2035 and 2.7 million in 2055 based on the projected trajectory of the national debt compared to if it were to stay at its current level. This could also lead to a decrease in wages as high as 3% by 2055. Essentially, a rising federal debt means the opposite of wage growth. One of the simplest ways to reduce the national debt is by increasing government revenue, and that is largely done through higher tax rates. 'Unless we have miraculous growth, that tax rate will have to rise on people,' Drechsler said. '... But it's becoming increasingly toxic to ever talk about raising them, so in this political climate, I'm not sure it's going to happen anytime soon.' Whenever economists talk about economic growth, or a lack thereof, interest rates are generally the metric that follows. Higher interest rates determine who can buy property and cars and invest in a business. Learn more: When will mortgage rates go down? 'If [government debt] gets bigger and bigger, interest rates are going to be going up, because deficits are a direct stimulus to the economy. If they run huge budget deficits, then the Federal Reserve will raise interest rates to keep inflation in check,' Kyle said. 'There's only a certain amount of money looking for a home to be invested in and if the federal government soaks up ever more of it, consumers will feel that.' The Yale Budget Lab found that after 30 years with a 1%-of-GDP permanent increase in the federal deficit annual car loan interest would increase by $200 and annual mortgage interest on the median home by $2,300. Increased inflation is also a likely facet of a U.S. economy with an increasing national debt. The same Yale Budget Lab study noted that a deficit increase of 1% of GDP would raise inflation to the degree that, after five years, a household would lose $300 to $1,250 in purchasing power in 2024 dollars. Read more: What is inflation, and how does it affect you? In a recent survey, the Peter G. Peterson Foundation asked about the news that Moody's had downgraded the United States' credit rating. Eighty percent of survey voters, including 80% of Republican voters, said that the rating downgrade made addressing the national debt a more urgent priority. To Kyle, the big question is whether the United States might at some point default on its debt. That could signal an international debt crisis — for us and for future generations. 'People don't seem to realize that if we go ahead and break that debt ceiling, that means we're defaulting on our debt. We're not paying the interest on the debt,' he said. 'That would be an international catastrophe for which there is no precedent for a major reserve currency of the world. We don't know exactly what would happen, but it won't be good.'
Washington Post
09-05-2025
- Business
- Washington Post
A perfect economic storm might be coming our way
As the White House continues to take up all our attention with its ongoing tariff war against the world, a little ways down Pennsylvania Avenue, Congress is preparing a budget bill that could prove to be almost as consequential. If lawmakers renew President Donald Trump's 2017 tax cuts, enact all his newly proposed ones and do not cut spending, they will add up to $9 trillion to the national debt over 10 years (according to the nonpartisan Peter G. Peterson Foundation.) At that point, America would likely be running among its largest deficits as a percentage of gross domestic product in history — and that's in peacetime with no pandemic. At the same time, Washington is raising tariffs on almost all the country's imports. We might have the makings of a perfect storm in the global economy.
Fast Company
08-05-2025
- Business
- Fast Company
Step in and act where the government won't
The Fast Company Impact Council is an invitation-only membership community of leaders, experts, executives, and entrepreneurs who share their insights with our audience. Members pay annual dues for access to peer learning, thought leadership opportunities, events and more. It's been made clear in the past few months that the uncertainty we're facing as a country has impacted almost every level of society. And it's not lost on me that there is an overwhelming amount of pressure on our state leaders in the current political and economic environment. Unfortunately, I'm not confident that these leaders are using their power to tackle the deep-rooted issues that our country continues to face—like the growing wealth gap. In my home base of Albany, New York there are over 1,000 abandoned properties with the number of unhoused people rising 38% since 2022. Governor Hochul claims to have plans to reinvent New York City, the Finger Lakes and the Hudson Valley—recently announcing a $412 million proposal —but despite budget approvals, we've yet to see a concrete plan and timeline that will move the investment forward. Take it a step further. The wealth gap in America isn't just growing, it's accelerating. And the reality is, we can do something about this. According to the Peter G. Peterson Foundation, from 1981 to 2021, income for the top 20% of earners in the U.S. jumped 165%. For the middle and lowest earners? Just 33% and 38%. Why leaders should be frustrated I've grown tired of waiting for government leaders to step up and fight. I no longer expect sweeping reform from the top. So, I've focused on what I can do from the ground up. Four years ago, my wife Lisa and I started Business for Good in New York's Capital Region. Our mission is to close the wealth gap. We invest directly in communities: supporting small businesses, affordable housing, offering marketing and HR resources, mentoring entrepreneurs, and creating ecosystems that allow people to rise—and stay—out of poverty. It's working. But it's not enough. Not unless more of us get off the sidelines. That's why I'm calling on other leaders to join me in replicating the model that we've used for Business for Good. All it takes is simple, powerful steps that any business leader can follow to use their privilege for good. These are not theoretical—they work. And they're built on a belief that I hold deeply: Privilege can be shared, but only by those who have it. The courage to act is contagious. Here's where we start Change starts with one simple but powerful action: listening. We must be willing to actively hear from those who are directly impacted by the growing rise of uncertainty and inequity. Next, do your homework. Deepen your understanding of inequities and the impacts of rising uncertainty and systemic exclusion. Be courageous, as individual learning and growth is required to drive real change. Then, confront—and speak up. Acknowledge your own biases as well as share information and resources. If you have a platform, use it—your voice, your company, your community, social media, etc. Remember that if words matter, actions speak louder. We also need to partner with local government leaders and policy makers who are committed to dismantling barriers and fighting for each and every member of our communities. For us, at Business for Good, we work with local leaders in the Albany/New York Capital Region as part of our pilot program. Showing up matters. Leverage your privilege for good by sharing your opinion, engaging in activities that support belonging, starting a conversation, and connecting within your local community. Engagement is key. That means having hard conversations with colleagues, friends, and family. Be brave enough to speak up. We each have a role to play in breaking the silence and building awareness. Finally, invest. Real impact takes resources. Actionable ways to drive change At Business for Good, we've put our money where our mission is, fighting for our neighbors and communities. We've invested over $1 million to help create the Albany Black Chamber of Commerce—a hub for community leaders, entrepreneurs, and small businesses to thrive. We've supported a local community center focused on improving the lives of those in need from youngest to oldest. We're working with like-minded leaders in the private sector to tackle issues that our local government is not: housing and employment to name a few. Other leaders and cities can and should take this approach to replicate the progress we've seen in our community. I recently read a set of community values posted in Dubai. And while this was halfway across the world and it wasn't my own community, one message struck me: A successful society is one that lifts everyone up. Let's bring that idea home.
