Tag: Social Security Trust Fund

The Fed Is Very Concerned Over Spending and Interest on the National Debt

Mary Pat Campbell

Link: https://mishtalk.com/economics/the-fed-is-very-concerned-over-spending-and-interest-on-the-national-debt/

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Excerpt:

  • The current setup is nothing like the situation following WWII. Don’t expect another baby boom.
  • Instead, expect a massive wave of boomer retirements (already started) that will pressure Medicare and Social Security.
  • Depending on the kindness of foreigners to increase demand for US treasuries is not exactly a great plan.
  • Artificial Intelligence (AI) will undoubtedly increase productivity. But that is not going to offset the willingness of Congress to spend more and more money on wars, defense, foreign aid, child tax credits, free education, and other free money handouts, while trying to be the world’s policeman.

Author(s): Mike Shedlock

Publication Date: 12 Feb 2024

Publication Site: Mish Talk

New Bill Would Exclude Social Security From Income Tax

Mary Pat Campbell

Link: https://www.thinkadvisor.com/2023/05/22/new-bill-would-exclude-social-security-from-income-tax/

Excerpt:

New legislation, H.R. 3206, the Senior Citizens Tax Elimination Act, would repeal the inclusion in gross income of Social Security benefits.

Social Security advocates criticized the bill, saying it would hurt the solvency of the Social Security and Medicare trust funds.

Under current law, up to 85% of a retiree’s Social Security benefits are taxed, depending on income. This tax revenue is deposited to the trust funds.

The bill specifies that taxes cannot be raised to replace this revenue.

Author(s): Melanie Waddell

Publication Date: 22 May 2023

Publication Site: Think Advisor

Social Security Surplus Will Run Out in 10 Years, Report Estimates

Mary Pat Campbell

Link: https://www.thewealthadvisor.com/article/social-security-surplus-will-run-out-10-years-report-estimates

Excerpt:

Social Security’s reserves are projected to run out in 2033, according to a new report, at which point the entitlement program’s trust fund will be able to pay out just 77% of benefits to seniors.

That estimate is a year earlier than what was stated in the 2022 report for the Old-Age and Survivors Insurance (OASI) Trust Fund, according to the annual report released Friday from the trustees of the program. The revision reflects a 3% reduction in labor productivity and gross domestic product.

One bright spot: A projection for a key trust fund for Medicare is better. It’s expected to exhaust its reserves by 2031, three years later than reported last year, after new data forecast lower health-care spending.

Author(s): Janna Herron, Yahoo Finance

Publication Date: 31 March 2023

Publication Site: Wealth Advisor

Meet the Grinch Stealing the Future of Gen Y And Z

Mary Pat Campbell

Link: https://www.ineteconomics.org/perspectives/blog/meet-the-grinch-stealing-the-future-of-gen-y-and-z

Excerpt:

There’s one threat that gets far less attention, which has been impacting American workers since the 1970s: wages that just don’t keep up, despite increased productivity. Social Security was designed for wages that rise with inflation – but that’s not happening. In an interview with the Institute for New Economic Thinking, Eric Laursen, author of The People’s Pension: The Struggle to Defend Social Security Since Reagan, breaks down how the program works, why wage stagnation represents a mounting threat, and what can be done to strengthen and update the program for the 21stcentury.

Lynn Parramore: Social Security has been America’s most successful retirement program for the last 87 years. Yet the public is constantly hearing that the program is going to “run out of money.” Is that actually true? Can Social Security actually go bankrupt?

Eric Laursen: No, and the word bankrupt is just about a complete misnomer when it comes to Social Security. The program is funded by contributions that participants and their employers make through their paychecks. It’s also backed by a Trust Fund which is accumulated over time.

That Trust Fund is dwindling now, and it’s expected to run out of money in the early 2030s. But Social Security can’t actually go bankrupt. If the situation arises where there is not enough money either in the Trust Fund or coming through from contributions to fund current benefits, then those benefits can’t be paid, perhaps as much as 25%. In that case, Congress would be faced with a choice to either cut benefits or increase contributions.

There’s a lot of pressure from people who want to cut Social Security to do it now rather than waiting for that point in the future, because at that point, Congress would be under a lot of pressure to make good on what people have been promised.

….

LP: What would you do to make sure that Social Security is protected and remains strong? Does it need to be modernized in some ways to keep it effective?

EL: There are a number of things that can be done. One is to raise the cap. More of income beyond the $147,000 threshold needs to be taxed for payroll tax purposes. Another thing that can be done is passing the Social Security Expansion Act that Sanders, Elizabeth Warren, and others have backed. There is a special minimum benefit for Social Security recipients that’s aimed at keeping people who have really low incomes during their lifetimes above the poverty level, and that needs to be improved. That’s not asking a lot. It should be done.

You can also change the rules for wealthy people. One of the differences between now and 40 years ago is that people in the really high income brackets get much more of their income from investments, stock options, and other business holdings than they do from salaries and wages. We need to figure out a formula for applying the payroll tax to at least some of that investment income – like capital gains and so forth. Definitely, the CPI-E needs to be instituted. There should be an expansion of benefits across the board for Social Security benefits. We need the CPI-E at a base level that’s more reasonable. Another thing I think is important: one of the changes that happened in ’83 that was really bad was that Social Security survivor benefits were ended for children of deceased or disabled workers above the age of 18. It used to be that you could get those until 22 and they would help you to go to college. That was abolished. It would be a very good thing if that could be reinstated so that more people have some level of security to pursue higher education.

Author(s): Lynn Parramore

Publication Date: 20 Dec 2022

Publication Site: Institute for New Economic Thinking

Social Security Politics

Mary Pat Campbell

Link: https://marypatcampbell.substack.com/p/social-security-politics#details

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2022 OASDI Trustees Report, plus spreadsheets, etc. https://www.ssa.gov/OACT/TR/2022/

I am graphing the net change in the OASI (that’s the old age benefit part) Trust Fund, year-over-year.

I think you can easily see all those glorious years the Boomer payroll taxes were being stuffed into the Trust Fund… but really flowing right out into current spending for other goodies.

And you can see when that reversed and is now negative, and will continue to be negative until the Trust Fund is exhausted, in the early 2030s.

Author(s): Mary Pat Campbell

Publication Date: 7 Nov 2022

Publication Site: STUMP at substack

Solvency And Sustainability Of Social Security

Mary Pat Campbell

Link:https://www.lifehealth.com/solvency-and-sustainability-of-social-security/

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2021 Costs Exceed Income

As seen from subtracting the total cost shown in Table 2 from the total income shown in Table 1, Social Security paid out $56.3 billion more in benefits and expenses than it collected in income.

Because Social Security has trust funds, the total costs of 2021 were still met. However, the trust funds declined in 2021 by the $56.3 billion that costs exceeded income. At the end of 2020, the trust funds totaled $2,908.3 billion, and at the end of 2021, the trust funds totaled $2,852.0 billion.

Solvency

As highlighted in the Academy’s issue brief An Actuarial Perspective on the 2022 Social Security Trustees Report, the 2022 Trustees Report contains key solvency facts about the system:

  • Social Security costs continue to be projected to exceed the income of the program, until the trust funds are projected to become depleted during 2035.
  • If changes to the program are not implemented before 2035, 80% of scheduled benefits would be payable after depletion of the trust funds in 2035, declining to 74% by 2096.

Author(s): Amy Kemp, MAAA, ASA, EA

Publication Date: October 2022

Publication Site: Advisor Magazine

Why Social Security Looks ‘Relatively Good’ — for Now

Mary Pat Campbell

Link: https://www.thinkadvisor.com/2022/06/03/social-security-looks-relatively-good-now-long-term-outlook-still-ugly-ssa-actuary/

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In a post-mortem of the Social Security Trust Fund report released Thursday, the Bipartisan Policy Center hosted a webinar featuring speaker Steve Goss, chief actuary of the Social Security Administration. Goss looked beyond the headlines stating that the Old-Age and Survivors Insurance will run out in 2034 (a slight improvement from last year’s forecasted demise of 2033) and that the Disability Insurance fund is now solvent for another 75 years.

“We’re in a little better shape [than 2021] because the economy has come roaring back to such a wonderful extent,” Goss said.

He also pointed out that labor demand has had a “remarkable rebound.” For example, it took 10 years for the job market to come back after the 2008 Great Recession. However, the 2020 recession, which was “very deep and very abrupt,” has also reversed just as quickly and in the first quarter of 2022, “we are virtually back to the high level that we had just before the start of the recession.”

Author(s): Ginger Szala

Publication Date: 3 June 2022

Publication Site: Think Advisor

As our entitlements crisis gets closer, a solution moved farther away

Mary Pat Campbell

Link: https://www.washingtonpost.com/opinions/2022/06/09/social-security-medicare-crisis-approaching/

Excerpt:

The annual Social Security trustees report is once again upon us, and this year it actually bears some good news: The projections give us an extra year before the trust fund is exhausted in 2035.

At least, this sounded like good news when I first heard it. Then I remembered that I have been writing about these trustees reports for more than 15 years. When I started, all these projections sounded comfortably far off — we had decades to fix the problem! Now we have 13 years. And in all that time, we have done nothing at all, except watch the date of insolvency advance.

In 2008, it was 2040, and the people likely to be worst affected — those who would be eligible to retire just as the trust fund was exhausted — were 35. Now, the people facing the most disruption are 54, much closer to retirement than to their college graduation.

In the meantime, the politics of fixing America’s old-age entitlements has gotten considerably worse.

Author(s): Megan McArdle

Publication Date: 9 June 2022

Publication Site: Washington Post

Status of the Social Security and Medicare Programs

Mary Pat Campbell

Link: https://www.ssa.gov/OACT/TRSUM/index.html

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• The Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivors benefits, will be able to pay scheduled benefits on a timely basis until 2034, one year later than reported last year. At that time, the fund’s reserves will become depleted and continuing tax income will be sufficient to pay 77 percent of scheduled benefits.

• The Disability Insurance (DI) Trust Fund, which pays disability benefits, is no longer projected to be depleted within the 75-year projection period. By comparison, last year’s report projected that it would be able to pay scheduled benefits only until 2057.

• The OASI and DI funds are separate entities under law. The report also presents information that combines the reserves of these two funds in order to illustrate the actuarial status of the Social Security program as a whole. The hypothetical combined OASI and DI funds would be able to pay scheduled benefits on a timely basis until 2035, one year later than reported last year. At that time, the combined funds’ reserves will become depleted and continuing tax income will be sufficient to pay 80 percent of scheduled benefits.

• The Hospital Insurance (HI) Trust Fund, or Medicare Part A, which helps pay for services such as inpatient hospital care, will be able to pay scheduled benefits until 2028, two years later than reported last year. At that time, the fund’s reserves will become depleted and continuing total program income will be sufficient to pay 90 percent of total scheduled benefits.

• The Supplemental Medical Insurance (SMI) Trust Fund is adequately financed into the indefinite future because current law provides financing from general revenues and beneficiary premiums each year to meet the next year’s expected costs. Due to these funding provisions and the rapid growth of its costs, SMI will place steadily increasing demands on both taxpayers and beneficiaries.

• For the sixth consecutive year, the Trustees are issuing a determination of projected excess general revenue Medicare funding, as is required by law whenever annual tax and premium revenues of the combined Medicare funds will be below 55 percent of projected combined annual outlays within the next 7 fiscal years. Under the law, two such consecutive determinations of projected excess general revenue consitute a “Medicare funding warning.” Under current law and the Trustees’ projections, such determinations and warnings will recur every year through the 75-year projection period.

Publication Date: accessed 9 June 2022

Publication Site: Social Security Administration

9 Ways to Strengthen Social Security

Mary Pat Campbell

Link: https://www.aarp.org/retirement/social-security/info-2022/benefits-current-status-future-stability.html

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How did we get here? ​​As long predicted, demographics explain a good deal: In a decade, the entirety of the boomer generation — some 70 million Americans born between 1946 and 1964 — will have hit retirement age. As a result, the number of people receiving Social Security benefits come 2034 will be more than double the beneficiaries in 1985. ​​

But what wasn’t known as accurately was how much longer those boomers would live. “From 1940 to 2019, life expectancies at age 65 have increased by about 6.5 years,” says Amy Kemp, chair of the Social Security Committee of the American Academy of Actuaries.

The impact: Many workers will be receiving benefits for a longer period of time. And those with higher incomes, which are generally those who receive higher benefit amounts, tend to live longer on average. ​

Author(s): John Waggoner

Publication Date: 1 March 2022

Publication Site: AARP

Social Security: Benefit Terminations and the Trust Fund Running out

Mary Pat Campbell

Link: https://marypatcampbell.substack.com/p/social-security-benefit-terminations

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Through the mechanism of the Trust Fund, Congress can put off having to act on the fundamental demographic problem that they can’t do much about. They hope they can run the Magic Money Machine to cover all the goodies they want, and in 2034, the Boomers will mostly be over age 80. Maybe another pandemic will deal with them….

(and nobody cares about us Gen Xers. In 2034, I won’t even be eligible for Social Security old age benefits.)

Nobody expects the Social Security benefits to be cut in 2034, or whatever other magic date when the Trust Fund runs out. The only thing the current Trust Fund mechanism requires is cuts… only if Congress doesn’t actually pass legislation to “fix” the issue.

They have been doing ad hoc “fixes” to Medicare and other parts for years so as to avoid massive cuts.

Author(s): Mary Pat Campbell

Publication Date: 6 September 2021

Publication Site: STUMP at substack

More Than An Insolvency Date: What Else To Know About The Social Security And Medicare Trustees’ Reports

Mary Pat Campbell

Link: https://www.forbes.com/sites/ebauer/2021/09/01/more-than-an-insolvency-date-what-else-to-know-about-the-social-security-and-medicare-trustees-reports/

Excerpt:

This year, Social Security’s deficit is unusually high due to lower revenues and higher benefits: 1.75%. In 2040, the deficit climbs to 3.70% rather than 3.54%. In 2080, the deficit stands at 4.87% rather than 4.59%.

Put another way, if there were no Trust Fund accounting mechanism now, the OASI program would have been able to pay 93% of benefits. This would drop to 76% in 2035 – 2040 – 2045, then drop further to being able to pay 70% of benefits.

What’s more, this year, the actuaries changed several assumptions. They assume that by the year 2036, fertility rates will increase to 2.00 children per woman, an increase from the 2020 report’s assumption of 1.95. They also assume a long-term unemployment rate of 4.5% rather than 5%. At the same time, they calculate alternate projections with more pessimistic assumptions, including a continuingly low fertility rate (1.69), a higher rate of mortality improvement (that is, longer-lived recipients), a higher rate of unemployment (5.5%), and others. In these alternate calculations, the 2040 deficit becomes 6.47% rather than 3.7% (benefits 64% payable), and the 2080 deficit becomes 12.39% rather than 4.87% (benefits 50% payable).

Also consider that, at the moment, there are 2.7 workers for each Social Security recipient (2.8 in 2020). This is forecast to drop to 2.2 in 2040 and ultimately down to 2.1. But if the population trends are those of the pessimistic scenario, then that 2.1 would drop to 1.5 by the year 2080.

Author(s): Elizabeth Bauer

Publication Date: 1 September 2021

Publication Site: Forbes