SHORING UP SOCIAL SECURITY

Social Security is headed for a shortfall. But sooner or later, lawmakers will act to preserve your benefits.

- LISA GERSTNER

For years, policymakers—and future beneficiaries—have been wringing their hands over the prospects for Social Security. And make no mistake: The program is headed for trouble.

According to projections that the Social Security Board of Trustees released last April, starting in 2021 the program’s annual costs will exceed its income from employee and employer payroll taxes and interest earnings. Once the program turns that corner, Social Security will begin drawing down assets in its trust funds to continue providing full benefits. Largely driving the shortfall is a decreased birth rate since the baby boom generation, creating a higher ratio of retirees to workers paying into the program.

Social Security’s trust funds are on course for depletion in 2034, according to estimates the trustees issued in November to gauge the effects of the coronavirus crisis. That’s a year earlier than the 2035 depletion date the trustees had predicted in a report issued in April. Job losses, reduced hours and slowed wage growth diminish the amount of payroll tax revenues coming into the program.

The stakes are high. Overall, Social Security benefits represent about 33% of income among those 65 and older, according to the Social Security Administration. Half of married couples and 70% of single people rely on Social Security benefits for 50% or more of their income. And 21% of married couples and about 45% of unmarried people receive at least 90% of their income from Social Security.