Retirement & Financial Planning Report

The Social Security fund has been paying out more than it has been taking in since 2009 not counting interest credited by the Treasury on the bonds it is invested in. Image: Olesia Bech/

Depletion of the Social Security trust fund—now projected to occur around 2035—would require substantial immediate reductions in benefits and/or increases in payroll taxes at that time unless the law is changed to avoid that outcome, says a report for Congress.

The Congressional Research Service report is the latest of many warnings that the fund, built up over decades, is being spent down as ratio of those paying in to those drawing out is decreasing with the aging of the population. The fund has been paying out more than it has been taking in since 2009 not counting interest credited by the Treasury on the bonds it is invested in, and since 2020 if counting that interest.

“If a trust fund became depleted and current receipts were insufficient to cover current expenditures, there would be a conflict between two federal laws. Under the Social Security Act, beneficiaries would still be legally entitled to their full scheduled benefits. However, the Antideficiency Act prohibits government spending in excess of available funds, so the Social Security Administration (SSA) would not have legal authority to pay full Social Security benefits on time,” it says.

Under current law, the difference could not be made up from general revenues or borrowing, since Social Security is set up to be self-funding, it added. The program still would be taking in money from payroll taxes—which are split evenly between employers and employees—but that would be enough to cover only about 80 percent of ongoing benefits at the time.

“Congress could restore balance by immediately reducing scheduled benefits by about 20%; the required reduction would grow gradually to 26% by 2096. An alternative could be for Congress to raise the Social Security payroll tax rate from 12.4% to 15.6% following depletion in 2035, then gradually increase it to 16.7% by 2095,” it said.

Also in an echo of many prior similar warnings from CRS and elsewhere, it adds this: “The sooner adjustment to Social Security policy is undertaken, the less abrupt the changes would need to be, because they could be spread over a longer period and would therefore affect a larger number of workers and beneficiaries. As well, enacting adjustment to Social Security policy sooner, rather than later, would give workers and beneficiaries more time to plan and adjust their work and savings behavior.”

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