Source: Office of the Inspector General, Social Security
Every year, the trustees responsible for the Social Security
program are required by law to submit their annual report by
March 31. Almost four months late, the 2014 Social Security
Trustees Report finally got released, and inside the
258-page document (link opens PDF)
, you'll find vital information about the health of Social
Security and the sustainability of the benefits you receive now
or will receive in the future. Let's take a look at a few of the
key takeaways from the 2014 Social Security Trustees Report.
1. Social Security's coming financial crisis is still on
This year's Social Security Trustees Report confirmed prior
expectations about when the program's trust funds will start to
run out of money. For the Old Age and Survivors side of Social
Security, the trustees expect that the program will be able to
pay full benefits until 2034. After that, the Social Security
Trustees expect that taxes will be sufficient to pay 77% of
benefits, even if lawmakers make no changes to the program.
For the Disability Insurance portion of Social Security,
though, potential problems are more imminent. The Disability
Trust Fund will run out of money in 2016, which is also
consistent with expectations from previous years. In part, the
trend hurting the disability side of Social Security stems from
the fact that the aging Baby Boom generation reached its peak
disability years before it reached its normal retirement age, and
analysts hope that as more Baby Boomers retire, it will ease the
burden on the Disability Insurance program. The Social Security
Trustees Report noted that if funds are moved between the two
halves of the program, then the combined trust funds could
sustain all of Social Security through 2033.
2. Social Security fixes are still possible
Given the potential consequences of failing to act, the obvious
question is what it will take to fix Social Security. The 2014
Social Security Trustees Report outlines some possible solutions
that would return Social Security to solvency for the next 75
Under one scenario, the trustees suggest that raising payroll
taxes by 2.83 percentage points would be sufficient to close the
gap and provide full benefits to all retirees and other Social
Security recipients from now through 2088. That would take the
current employee Social Security payroll tax up from 6.2% to
7.61%, with employers shouldering a similar increase in their
Alternatively, cuts in benefits could be made now. A reduction
of 17.4% would be adequate to close the gap if it applied to all
recipients, both current and future. If the reductions were
limited to those not yet receiving benefits, it would require a
20.8% cut. Lawmakers could also use a combination of the two
methods to bridge the gap and keep Social Security solvent.
3. Optimists still believe Social Security could avoid a
Even with the headline numbers indicating that Social Security
will run out of money, the Social Security Trustees Report admits
that the future is still uncertain. Under different sets of
assumptions, the report includes scenarios that would lead to
insolvency as early as 2028. By contrast, at least one projection
-- which includes greater fertility rates in the future, a slower
increase in life expectancy, and higher interest rates, wages,
and employment rates -- has the Social Security Trust Fund
running out of money.
The Trustees Report, however, warns that those optimistic
scenarios are highly unlikely. Based on its models, the report
puts the greatest odds of Social Security running out of money
between 2028 and 2044, with only a 5% likelihood that the actual
date would fall outside of that range.
Despite the long wait, the 2014 Social Security Trustees
Report didn't really give its readers any great surprises.
Nevertheless, with information you need to know in order to plan
for your retirement, the report is invaluable in helping you come
up with realistic expectations about Social Security's
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3 Key Takeaways From the 2014 Social Security
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