The Social Security Administration (SSA) said that the Old-Age and Survivors Insurance (OASI) Trust Fund can pay 100% of the total scheduled benefits until 2033, revising the estimate downward by one year when compared to the report from 2022.
If the new estimate is correct, then benefit payments will need to be sharply cut to continue beyond that point.
“At that time, the fund’s reserves will become depleted and continuing program income will be sufficient to pay 77% of scheduled benefits,” SSA said in the 2023 Trustees Report released last week.
Economic sluggishness was the primary culprit for the revised OASI projection, according to the report.
“Since last year’s reports, projected long-term finances of the […] Trust Funds worsened due to the Trustees revising down the expected levels of gross domestic product (GDP) and labor productivity by about 3% over the projection window,” SSA said in its report. “The Trustees made this change as they reassessed their expectations for the economy in light of recent developments, including updated data on inflation and U.S. economic output.”
As we inch closer to 2033, the less likely benefit cuts become, according to Mark Miller, retirement expert and columnist for Reuters.
“Benefit reductions typically are phased in slowly for future beneficiaries, so the impact of any cuts would not be adequate to achieve solvency,” Miller said in a Reuters column.
That point was reiterated by Andrew G. Biggs, a senior fellow at the American Enterprise Institute.
“We’ve delayed so long that there are no plausible benefit reductions that can keep the trust fund from running dry in the 2030s,” Biggs told Reuters.
Still, while Social Security benefits have risen in recent years to offset the rise in living costs stemming from inflation, success in achieving that goal has been mixed.
That is one reason why reverse mortgage professionals have advised clients to assess the potential benefits of tapping home equity, as the senior cohort has seen substantial increases in their equity levels in recent years.
Lawmakers are reportedly considering other options to bring solvency to the Trust Fund, including raising the retirement age.
However, the financial standing for the Medicare program — which provides healthcare coverage for seniors — showed slight improvement in 2022 due to higher levels of projected revenue.