The Social Security Trust Fund is projected to run out by 2035, signaling a looming financial challenge for millions of Americans.
The Social Security system's main trust fund is now projected to be depleted by 2035, according to the latest annual report released by the Social Security Board of Trustees on May 6. Once the trust fund is exhausted, Social Security benefits will be cut to 83 percent of their current level.
The trust fund in question combines the asset reserves of the federal Old-Age and Survivors Insurance and Disability Insurance (OASI and DI) Trust Funds. The Treasury Department attributed the outlook to revised expectations for labor productivity and economic growth, alongside a decrease in assumptions about long-term disability rates.
Martin O’Malley, the Social Security commissioner, remarked, “The projected one-year delay in the fund’s go-broke date is good news for the millions of Americans who depend on Social Security.”
The report proposed increasing revenue, reducing benefits, or a combination of both to extend the impending shortfall. A Republican task force has suggested raising the retirement age and reducing benefits for high-income earners as part of the solution. Conversely, Democrats advocate for increasing payroll taxes on wealthier Americans. The current Social Security tax is capped at 6.2 percent of the first $168,600 of employee wages.
Senators Bernie Sanders and Elizabeth Warren, along with Representatives Jan Schakowsky and Val Hoyle, have introduced the Social Security Expansion Act. This legislation seeks to apply payroll taxes to all income above $250,000, which they claim would keep the OASI fund solvent through 2096. The Heritage Foundation, however, criticizes the act, suggesting it would impose $33.8 trillion in new taxes and cause economic harm.
Some Republicans, including Sen. Mike Lee, have proposed privatizing parts of Social Security, allowing a portion of payments to go into private accounts, which has sparked considerable debate.
In response to the trustees' report, President Joe Biden proposed raising taxes on wealthier Americans to extend the fund's solvency. "I am committed to extending Social Security solvency by asking the highest-income Americans to pay their fair share without cutting benefits or privatizing Social Security," he stated.
