Worries mount for America's top social program
According to the Social Security Board of Trustees' 2017 report, released last summer, the program is on track to begin paying out more in benefits than it's generating in revenue by 2022. That's just four years away. While there are numerous reasons this shift is under way, the major catalysts include the ongoing retirement of baby boomers from the workforce, steadily lengthening life expectancies over many decades, and growing income inequality that's allowed the well-to-do to live longer and collect higher monthly benefits than low-income workers.
The real concern and uncertainty surrounds what happens 12 years later. The Trustees report projects that Social Security's Trust will have completely exhausted its roughly $3 trillion in asset reserves -- the extra cash it's built up over the past three-and-a-half decades that's currently invested in special-issue bonds and certificates of indebtedness -- by 2034. Many people view the depletion of this excess cash as a sign of the program's insolvency. In fact, 51% of nonretirees surveyed by Gallup in the summer of 2015 didn't expect to receive a monthly Social Security benefit when they retire.
Thankfully, though, as things stand now, Social Security won't be going bankrupt anytime soon.
If nothing changes, Social Security can't go bankrupt
Social Security is funded three separate ways. The smallest contributor is the taxation of Social Security benefits at the federal level. Signed into law in 1983, single taxpayers whose adjusted gross income plus half of their Social Security benefits tops $25,000 can have half of their benefits exposed to federal ordinary income tax. For couples filing jointly, this figure is $32,000. In 1993, a second tier was added that allowed 85% of Social Security benefits to be taxed at the federal level for single taxpayers with earnings above $34,000 and couples filing jointly over $44,000. In 2016, the taxation of benefits provided $32.8 billion of the $957.5 billion collected.