Social Security marks 80 years
Social Security turns 80 today, and the massive retirement and disability program is showing its age.
Social Security’s disability fund is projected to run dry next year. The retirement fund has enough money to pay full benefits until 2035. But once the fund is depleted, the shortfalls are projected to be enormous.
The stakes are huge: Nearly 60 million retirees, disabled workers, spouses and children get monthly Social Security payments, and that number is projected to grow to 90 million over the next two decades.
And the timing is bad: Social Security faces these problems as fewer employers are offering traditional pensions, forcing older workers to think hard about how they will afford retirement.
“This is a program that’s been immensely popular since it began,” said Nancy LeaMond, executive vice president of AARP. “Increasingly, people recognize that saving for retirement is becoming harder and harder, and Social Security is becoming even more important.”
President Franklin Delano Roosevelt signed the Social Security Act on Aug. 14, 1935.
Here are things to know about the federal government’s largest program on its 80th birthday:
WHY IS SOCIAL SECURITY AT RISK?
Social Security’s long-term financial problems are largely a result of demographic changes. Every day, about 10,000 people in the U.S. turn 65. These are the baby boomers.
Typical boomers, however, didn’t have as many children as their parents did.
As a result, relatively fewer workers are left to pay the payroll taxes that support Social Security.
Americans also are living longer. In 1940, someone who was 65 could be expected to live about 14 more years, on average. Today, they can expect to live an additional 20 years, on average.
WHAT HAPPENS IN 2016?
The trust fund that supports Social Security’s disability program is projected to run dry in late 2016 – right in the middle of the presidential election.
If Congress allows that to happen, it will trigger an automatic 19 percent cut in benefits to the 11 million people who receive Social Security disability.
HOW BIG IS THE LONG-TERM PROBLEM?
Social Security uses a 75-year window to forecast its finances, so the projections cover the life expectancy of every worker paying into the system.
Over the next 75 years, Social Security is projected to pay out $159 trillion more in benefits than it will collect in taxes, according to agency data.
That’s not a typo.
Adjusted for inflation, the shortfall comes to $35.3 trillion in 2015 dollars. That’s nearly twice the national debt, which took the entire federal government 239 years to accumulate.