Recently, the Social Security’s board of trustees released a yearly report on the long-term financial health of its trust fund, saying that the numbers will likely drop in 17 years. These funds come from the Social Security taxes that both employers and workers pay, which are also invested and used to provide retirement, survivor and disability benefits to around 61 million Americans.
Unfortunately, disability social security is one of the programs that will be greatly affected if the gloomy prediction about the trust fund comes true. According to the report, the asset reserves of the Old-Age Survivors Insurance and Disability Insurance Trust Funds reached $2.85 trillion last year. That’s $35 billion higher than in 2016 and the figures are expected to continue increasing in the next few years.
However, the board believes that the assets would eventually deplete, with annual benefits paid out surpassing the amount that taxpayers pay five years from now. Congress will have to act on it before 2034. Otherwise, only 77% of scheduled benefits will be covered as the assets get drained.
Cause of Decline
Baby boomer retirees, lower birth rates and longer life expectancy are the three demographic factors seen to pull down the asset totals. In 1935, when Social Security started, a 65-year-old retiree will likely live up to 77. Currently, the life expectancy is longer, with retirees seen to reach the age of 85 on average.
Also, the ratio of workers paying for the benefits has dropped. If in 1950 there were 16 workers shouldering the benefits of one person, the numbers are lower today. The current ratio is set at 3.3 to one. In 17 years, it’s likely that only two workers would pay for each person in need of benefits.
The report explores various ways to prepare and deal with the bleak forecast. One solution is to increase the payroll tax employers and their workers contribute to Social Security to boost future assets.
Another solution is to lower the amount of benefits given to younger workers who can plan and prepare for retirement better. Last but not the least, taxable Social Security benefits targeted to retirees with higher income can be increased. All these solutions can work to prevent the drop in trust funds. However, they can be more effective if they are combined as seen fit.
When this forecast becomes reality, it will affect millions of Americans relying on social security benefits, including people with disabilities. As a result, hospitals and healthcare facilities may also see changes in their revenues. That’s also why this report is crucial to revenue cycle management experts so that they can prepare hospitals for such an eventuality.
Social Security’s Grim Prognosis, Cbsnews.com
All Americans Plan to Rely More on Social Security, But it Could be Insolvent by 2034, Cnbc.com
Categories: Social Security