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Three Biggest Issues Facing Social Security

June 3, 2020
If you read my May 8th, 2020 blog on the financial outlook for the Social Security Disability Program, you are aware that the financial viability of the program looks bleak at the moment. Unfortunately, the same thing can also be said about the Retirement and Survivors portion of the Social Security Program as they are both tied to the same fund, OASDI. Here are, in my opinion, the three biggest problems Social Security is facing:

1. Social Security pays out benefits to roughly 60.5 million people each month. According to the latest Trustee Report. the OASDI fund which funds Old Age (retirement), Survivors, and Disability benefits is slated to run out of money in 2034. This is due, at least to a considerable degree, to the aging baby boomer population and the decreasing worker-to-beneficiary ratio. It is estimated that from 2010 to 2030, more than 70 million baby boomers will reach retirement age and become eligible beneficiaries while at the same time, there is not expected to be enough new workers in the labor market to replace the retiring baby boomers. This creates a shortfall of payroll taxes coming in that are needed to continue to pay benefits.

2. Compounding the above is the fact that the average life expectancy continues to rise and people live longer. Since 1960, the life expectancy of the average US adult has risen over 9 years. This means that Social Security is now paying the average benefit recipient an extra 9 years of payments compared to what was expected in 1960. This drastic increase in life expectancy was apparently not considered by the architects of the Social Security Program and has helped fuel the dire situation the program is now facing.

3. One issue one might not inherently link to the economic crisis facing the Social Security Program is the falling interest rates. Interest rates are at or near record lows and while this is a blessing for consumers, homeowners, and business owners, for a fund that is invested in bonds, as the OASDI is, the low interest rates mean less interest income, causing the program to dip into its reserves to pay current benefits.

The above does not paint a very optimistic picture about the viability of the Social Security Program past 2034 and with Congress seemingly unwilling to address any potential fixes or solutions, it doesn't seem the issue will be dealt with anytime soon.

One potential way to increase your retirement amount if you are under age 64, is to file for Social Security Disability benefits. The difference in your benefit amount at age 62 between Retirement benefits and Disability benefits can be as much as $500.00 per month. When you are on a fixed income, any extra monthly amount can make a big difference. Please contact my office and I will be happy to discuss your potential eligibility for Social Security Disability benefits.