The future of the Social Security system: Part three

Stephen<lovejoy@msu.edu> Lovejoy, Michigan State University Extension - September 01, 2015

Will future workers receive Social Security benefits?

While some commentators have suggested that today’s workers will not receive Social Security benefits when they retire, Michigan State Universuty Extension highlights the issues surrounding the future of Social Security. Even if policymakers do nothing, the program could still pay about three-quarters of benefits.

Social Security has been around since 1935, and there is no indication that policymakers intend to eliminate the program. Although Social Security faces serious financial challenges, benefits would not disappear unless lawmakers acted to eliminate them.

The Social Security trustees expect the (theoretically) combined trust fund reserves to be depleted in 2034, which means the program could only pay benefits from incoming revenue thereafter. However, Social Security would continue to collect payroll taxes, which the trustee’s project would initially be sufficient to pay 79 percent of scheduled benefits, ultimately declining to 73 percent.

Rather than causing benefits to “disappear,” the absence of legislation would probably either lead monthly checks to be reduced by about one-fifth (more in later years), or issued on a delayed basis that resulted in equivalent annual benefit cuts. This cut would apply to all current beneficiaries regardless of age or income, as well as to future beneficiaries.

An immediate cut of that magnitude – particularly for older and lower income retirees – could be devastating. For that reason, most observers agree that Congress should take action to avoid such an abrupt cut.