Social Security is possibly the most important social program in the United States. Each year, 21.7 million Americans are raised from poverty entirely because of their Social Security checks each month, according to the Center of Policy Priorities and budget.
It is also a program the vast majority of Americans will depend on, to some degree, during retirement. National pollster Gallup found that 85 percent of people that have not retired yet and were surveyed in April 2021 plan to depend on Social Security as a minor or major source of income to live on in their retirement years.
Yet, with as successful as Social Security has been for decades, it does have some serious financial concerns.
Social Security hasn’t done this in four decades
Just as investors can review a publicly traded company’s balance sheet and income statement to find out the total revenue a company is making and what that money is being spent on, Social Security’s “balance sheet” is published yearly.
Each year, the Social Security Board of Trustees releases a long report that examines every part of the program. This includes complete data on the total revenue Social Security made from its 3 income sources — the taxation of benefits, the taxation of payroll tax, and interest income — and how much of that money was channeled into administrative costs and payments.
Since Congress passed the Social Security Amendments of 1983 and it was signed into law by then- Pres. Ronald Reagan, the program has had an increase in their cash reserves. This is to say that Social Security has continually brought in more revenue each year than it has paid out. Social Security’s asset reserves increased from around $25 billion to $2.91 trillion between 1982 and 2020.
But this trend has changed. Even though the 2022 Board of Trustees balance sheet will not be published for at least several more months, the Social Security Administration will update each month on its investment holdings. It is required by law for the program’s asset reserves to be put in special-issue bonds, like United States Treasury bonds. Between the end of Dec. 2020 and the end of Dec. 2021, the total investments held by Social Security dropped over $31 billion. That is the 1st cash outflow for Social Security since 1982.
Even worse, these outflows are only slated to worsen. According to the intermediate-cost model (i.e., what the Board of Trustees thinks is most likely to happen), Social Security’s cash outflow might decrease the program’s asset reserves to only $1.34 trillion by 2030.
Comments are closed.