Social Security benefits confront potential large reductions by 2033, absent Congressional intervention
Host: LEILA FADEL
Say goodbye to cash in the Social Security Trust Fund as early as 2033, reportedly.
Host: STEVE INSKEEP
Well, if Congress doesn't shape up, retirees are in for an ugly surprise. Benefits would likely be slashed by a whopping 23% without action!
Guest: NPR's Laurel Wamsley
Hey there, Leila. Quite the pickle for our retirees and future retirees, huh?
Laurel Wamsley
Yup. We're looking at a disaster if Congress doesn't act. A fresh report is saying the Trust Fund will be dry by 2033, and it spun us some disturbing details about the reasons behind this crisis.
Host: LEILA FADEL
Straightforward as ever, huh, Laurel? Let's get to it. So, how did they dig this deep hole?
Laurel Wamsley
Well, it's been a long time coming. An enormous number of baby boomers reaching retirement age combined with a dwindling workforce means the coffers are running on empty. For years, there was more money pouring in than going out, but as of 2021, we tapped into the reserves. Add to that the new law benefiting nearly 3 million workers, and here we are.
Host: LEILA FADEL
What's with that new law spawning this mess?
Laurel Wamsley
To break it down, that law bumped up benefits for folks with pensions, like you'd find in teaching, firefighting, or federal jobs. That's great for them, but it accelerates the depletion of the trust fund. The Trust Fund is where payroll taxes and income go, but Social Security is essentially a pay-as-you-go system, so our benefits come from today's workers' taxes. And that BIG spike in withdrawals? Can't ignore it.
Host: LEILA FADEL
So, when the reserves dry up, folks just stop getting their checks, right?
Laurel Wamsley
Not exactly. Benefits wouldn't disappear completely, but they'd take a significant hit. Retirees would only snag around 77% of their due benefits, and that percentage would drop to 69% by the end of the century. With Social Security being the main source of income for most retirees, that's a hard hit.
Host: LEILA FADEL
Worst-case scenario: when the reserves are gone, do we just stand around with no benefits at all?
Laurel Wamsley
Hardly. There'd still be money coming in from payroll taxes, but that wouldn't be enough to cover the whole enchilada. Benefits would be cut, as I mentioned, but the extent of the cuts depends on Congressional action beyond 2033. If no action is taken, benefits will continue to shrink.
Host: LEILA FADEL
What's the best-case scenario?
Laurel Wamsley
For that, we can look at our legislators. Congress can raise taxes, lower benefits, or do a mix of the above. If no changes are made, benefits will be automatically cut when the reserves become depleted.
Host: LEILA FADEL
Thanks, Laurel. That wasn't the cheeriest news, but we should definitely keep an eye on this.
Laurel Wamsley
Me too, Leila. More gloom than charm, but it's important to be on top of things.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary.
Enrichment Data
Overall:Learn more about why the Social Security budget faces depletion, how the government can act to shore it up, and the potential ramifications for retirees.
Key Points:
- The depletion of the Social Security Trust Fund's reserves in 2033 stems from demographic and economic factors, including an increasing baby boomer population, a dwindling workforce, a reduction in fertility rates, policy changes, and economic pressures.
- Without legislative action, benefits would be cut sharply, causing financial hardship for millions of retirees who rely on Social Security for most of their income.
- Congress can address the funding shortfall by raising taxes, cutting benefits, or a combination of both to maintain Social Security's solvency for future generations.
[1] Retirement Research Center, University of Michigan https://www.rrc.isr.umich.edu/discussion-paper/2022-080/[2] Social Security Administration, 2022 Trustees Report https://www.ssa.gov/OACT/TR/2022/index.html[3] Center on Budget and Policy Priorities, Fact Sheet: The Importance of Social Security and Near-Term Actions Needed to Protect the Program for Future Generations https://www.cbpp.org/research/retirement-security/the-importance-of-social-security-and-near-term-actions-needed-to[4] The Baltimore Sun, Social Security benefits can’t keep up with inflation https://www.baltimoresun.com/news/opinion/op-ed/bs-ed-social-security-cost-of-living-20220512-sjegoj62lrd7d7kjhueub66jgz-story.html[5] The Urban Institute, Fertility and Immigration Need to Increase to Sustain Social Security https://www.urban.org/urban-wire/fertility-and-immigration-need-increase-sustain-social-security
Benefits for retirees might face a 23% cut if Congress fails to act, as reported, due to the approaching depletion of the Social Security Trust Fund estimated for 2033. The crisis stems from a combination of factors, including the enormous number of baby boomers reaching retirement age, a dwindling workforce, and policy changes such as the new law benefiting workers with pensions.
As the Trust Fund's reserves run dry, retirees will only receive around 77% of their benefits, and the percentage could drop to 69% by the end of the century. This financial hardship could be alleviated if Congress raises taxes, lowers benefits, or takes a combination of both measures to maintain the system's solvency for future generations.
