The Uncertainty Of Social Security Benefits

Nearly 50 million Americans depend on Social Security to provide vital financial support during their retirement years. This important program also provides critical benefits to widows and those with disabilities. Unfortunately, Social Security faces a $4.6 trillion deficit over the next 75 years (an amount equal to over one-third the size of the entire U.S. economy). It is my top priority to preserve the Social Security safety net and make sure the program remains solvent for future generations.

Social Security Is Going Broke

Social Security is funded by the payroll taxes of current workers to pay the benefits of current retirees. At present, Social Security is running a surplus, meaning that there is more money being paid into the system than is needed to pay for benefits. In fact, the 2006 Annual Report of the Board of Trustees of the Social Security and Medicare Trust Funds reported that Social Security closed fiscal year 2005 with a $172 billion surplus. For fiscal year 2006, the surplus is expected to be at a similar level.

Unfortunately, Social Security will not continue to experience surpluses forever. In 2017, only ten years from now, Social Security will begin to pay out more in benefits than it brings in through payroll taxes. This will move the program into permanent and growing deficits. In addition, this will also have the effect of increasing our annual budget deficit by hundreds of billions of dollars per year, as the surplus will no longer be available to partially offset the deficit in other areas of government spending. Even worse, the Social Security Trust Fund is expected to be completely exhausted by 2041. This will leave the program insolvent and unable to pay all of its promised benefits to seniors.

The main reason for this looming financial crunch is that our society is aging, and as a result, there are fewer workers to support each retiree than when Social Security was created. Increasing life expectancy and the approaching retirement of the “baby boom” generation continues to put increasing pressure on Social Security each year. Between 2000 and 2025, the number of people age 65 and older is predicted to rise by 69 percent, while the number of workers whose taxes will pay for future benefits will grow by only 13 percent. As a result, the number of workers supporting each Social Security recipient is projected to fall from 3.3 today to 2.2 in 2031. When comparing these figures with those from 1950 (when there were 16 workers for every 1 recipient), the changes in the program become clear.

The notion that the Social Security Trust Fund is a true pension trust fund – where individual contributions are earmarked, invested, and saved for your retirement – is incorrect. Social Security was never meant to be a fully funded pension program, nor does it contain genuine assets. The system operates essentially on a "pay-as-you-go" basis; today’s workers pay taxes to support today’s retired beneficiaries, under the premise that the generation that follows them will do the same.