Recently Social Security released its annual report on the financial status of the Social Security System. The Old Age and Survivor’s Insurance benefit is projected to last until 2034, which is the same as the estimate from last year. The disability portion of Social Security is expected to last until 2052, and this has been extended 20 years from the last estimate.
Pursuant to the Social Security report, the following are some of the highlights of the report:
1. The assets in both the Old Age and Survivor’s Insurance portion of Social Security and the Disability Insurance portion of Social Security increased by $3 billion in 2018 to $2.895 trillion.
2. The cost of the Social Security Program is expected to exceed the total annual income for the first time since 1982 in 2020.
3. As previously stated, the Old Age and Survivor’s Insurance portion of Social Security is expected to be depleted in 2034, at which time only 80% of the scheduled benefits would be able to be paid.
4. The increased amount of funds in the Disability Insurance portion of Social Security is due to the reduction in the number of disability applications that have been filed each year since 2010 and the number of disabled worker beneficiaries who have been receiving payments has been declining since 2014.
5. Social Security paid benefits of nearly $989 billion in 2018. During 2018, 176 million people had earnings covered by Social Security and paid payroll taxes.
This Social Security projected deficit has been in the news for a number of years, and Congress has not addressed any changes to help with the expected problem. Over the years, there have been a number of different ideas discussed concerning how to fix Social Security. Some of those ideas are as follows:
1. The Social Security earnings cap could be raised so that more earnings would be subject to the Social Security tax. The 2019 cap is $128,400.
2. The Social Security earnings cap could be eliminated.
3. The full retirement age could be increased.
4. The amount of Social Security benefits could be frozen for those individuals above a certain income threshold or it could be frozen for everyone.
5. There could be a certain annual income threshold, and if a senior was earning more than that threshold, they would either receive a reduced Social Security payout or no payout at all for Social Security.
6. The Social Security retirement age could be indexed because of the longevity that everyone is living. Therefore, full retirement age would increase in step with the life expectancy tables.
7. The estate tax could be used to cover the shortfall, and therefore, there could be a possible reduction in the amount of estate tax exemption. The current exemption is $11,400,000 per individual, and, therefore, no estate tax is paid if an individual passes away with an estate under that amount. If the assets are more than that amount, then 40% would be paid to the government for the estate tax and this would be used to fund the social security system. We will see what Congress decides to do to address this problem over the next few years.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.