The 5 Biggest Takeaways from the 2022 Social Security Trustees Report | Smart Change: Personal Finance

Each year, the trustees who govern the Social Security trusts write a report on the program’s financial position. The 2022 Social Security Trustees Report is 275 pages long. But don’t worry, because below you’ll find the top five things the report told Americans about what Social Security would look like.

Most people have one concern about Social Security: When do trust funds run out? According to the report, the year in which pooled trust funds will reach zero is 2035 — one year later than the trustees predicted in the 2021 report.

Interestingly, for the first time ever, the trust fund dealing with disability benefits is expected to last over the next 75 years. However, the much larger Trust for Retirement Benefits will run out of money in 2034, and transferring the available surplus from the Disability Trust will buy the program for only one year.

Even if trust funds run out, Social Security won’t stop. But the program will not have enough funding to pay 100% of the scheduled benefits without taking money from elsewhere.

Without outside help, Social Security trustees expect to be able to pay 77 percent of heirs’ retirement benefits from a trust specifically designated for old-age and heirs’ benefits after it runs out of assets. If you combine both trusts, and transfer funds for disability benefits to be used to pay retirement benefits, you will allow Social Security to pay 80% of assessed benefits. That’s a lower cut than in recent years, but it will still be a pain for retirees.

Social Security reform would be expensive. If lawmakers choose to increase payroll taxes to generate enough revenue to pay full benefits, they would have to increase the 6.2% that is currently being taken from employee payroll to 7.82%. Employers would be in trouble for a similar increase in their share of Social Security payroll taxes.

Alternatively, lawmakers can cut benefits now. They would need to reduce all existing and scheduled benefits by 20.3% for now or impose a larger 24.1% reduction on those who will become eligible for benefits in 2022 or later.

Although these procedures are difficult, they are easier than what would happen if lawmakers had postponed. Waiting until 2035 will require an increase in payroll tax to 8.235%, or a 24.9% reduction in all benefits will be necessary starting in 2035. A combination of these two strategies can also ensure the financial strength of Social Security.

The Social Security Trustees’ report is very long because it includes complex statistical and actuarial analyzes. The headline numbers that repeat each year seem like they’re set in stone, but in fact they represent the midpoint of a predictable range of possible outcomes.

In particular, trustees look at confidence intervals to determine the most likely outcomes, with different assumptions guiding different scenarios. The 2022 report expresses the belief that there is a 95% chance that the Social Security Trust Funds may run out of money as early as 2031 or as late as 2043. This is roughly consistent with previous reports, indicating that even as we get closer, there is a lot Of the variables that trustees can not predict.

Politicians have always had a hard time dealing with Social Security. But with the program running out of time, Washington will not be able to delay action any longer before the consequences are dire.

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