One things for sure: Benefits won’t disappear entirely
The trustees of the Social Security system’s finances released their annual report on Wednesday afternoon. They say the combined trust funds that help pay old age and disability benefits are likely to run out by 2034, the year when today’s 48-year-olds reach full retirement age. The trustee’s estimate reflects the latest economic and demographic projections, and it changes a bit most years. Last year’s estimate for trust fund depletion was 2033.
But what does it mean to say the Social Security trust fund has run out?
Let’s be clear: Social Security benefits won’t disappear entirely when that happens. If nothing else changes, the payroll taxes still being paid by younger people in the workforce will be enough to fund about 79% of scheduled benefits, says the report.
That’s because Social Security is by and large a pay-as-you-go system. At the individual level is looks a bit like a savings account, where you contribute money now in order to draw it down after you stop working. But in fact, it’s never been primarily run on saved money. Taxes from today’s workers are used to fund the benefits of today’s retirees.