The Facts 2012: Looking at Social Security
Last week the Social Security Administration released the 2012 OASDI Trustees Report which has both sides of the Social Security debate fired up. This report tells us exactly what is going on with the social security program but without the political interpretation. As Sergeant Joe Friday used to say on the TV show Dragnet "all we want are the facts, ma'am", so here are the facts.
- Social Security's finances have not been immune from the recession, higher than anticipated cost-of-living adjustments, increased disability claims, and other factors but the social security trust fund is still growing.
- The Social Security trust fund is currently $2.7 trillion and is expected to peak at over $3 trillion in 2020.
- Beginning in 2021 the trust fund will begin to shrink and will be exhausted in 2033
- Social Security will not cease when the trust fund ends, but the only source to pay benefits will be current payroll taxes.
- Current assumptions and projections anticipate that payroll taxes will be able to provide about 75% of the promised social security benefits in 2033 and 73% by 2086.
- This year, the trustees changed several demographic and economic assumptions which moved the trust fund's demise up by three years.
So what does this mean to you? The answer is largely influenced by your age. As long as you don't intend to draw any benefits beyond 2033, there is probably nothing to fear. The trustees have factored in all the currently unfavorable conditions and have concluded we are safe until then. Those of us who still plan to be around and kicking past 2033 cannot plan for anything more than 2/3 of the promised benefits assuming that lawmakers continue to sweep this issue under the rug.
Of course, being an election year, I would expect a lot of rhetoric about Social Security. Some will argue doom and gloom, others will say the system is fine as it is.
What do you think?
Illustration Social Security Card by DonkeyHotey