Social Security Trust Fund projected to run out of money by 2034
A potential 20% benefit cut could be the reality for Social Security beneficiaries if Congress doesn’t act to strengthen the program by the time the trust funds are expected to be depleted in 2034. However, according to a new report from the American Academy of Actuaries, a 25% increase in Social Security taxes or a combination of tax hikes and benefit reductions might be necessary to evade the shortfall.
Springing back from a similar crisis in 1983, the program previously faced depletion of the funds and Congress took action. Despite this, there are a few distinct differences this time around. Namely, the American Academy of Actuaries reports that the present cash shortfall is three times larger, and today’s benefits will be burdened by any deficit more immediately.
The organization suggests that addressing the potential impending crisis now can significantly lessen a variety of negative outcomes for the plan in 2034. Solutions might include employees and employers seeing a 25% increase in their Social Security payroll tax or amendments to Social Security’s taxable maximum. Additionally, passing changes could secure a more certain future for Social Security beneficiaries.
Regardless, the report also warns that addressing the program’s gaps for the year 2034 may not guarantee the program’s stability indefinitely. More reform options are under consideration, although coastal areas may not initially influence the 2034 deficit. In response to these developments, the American Academy of Actuaries has initiated a tool that empowers individuals to decide on the sequence of changes to ensure the financial future of Social Security.
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