Obviously, much can change when it comes to Social Security. Given that by 2035 payroll taxes will only provide about 75 cents for each dollar of scheduled Social Security benefits and that the retirement and survivors benefits trust fund is projected to be depleted, something will have to change. Politically, it may become a significant issue, particularly if the United States budget deficit continues to increase. Social Security, Medicare, and Medicaid currently account for about 45% of the U.S. federal government program expenditures. A lack of trust fund reserves and an increasing budget deficit would make financing any shortfall of scheduled Social Security benefits challenging – unless changes are made.
A variety of changes are possible:
- Reducing benefits
- Increasing the retirement age for full benefits
- Increasing payroll taxes
- Lifting the salary limit for social security taxes
- Providing another source of funding for Social Security benefits
In future years, eventually something will have to change regarding the funding or benefits derived from Social Security. Exactly what gets done, that will be a political choice.
CBEI Blog Series: Social Security
Part 1: How it Works and How it is Funded (or not)
Part 2: Who Gets Benefits?
Part 3: How Are Programs Funded?
Part 4: Benefits – How Much Do You Get?
Part 5: Financial Status of Programs
Part 6: The Future
Kevin Bahr is a professor emeritus of finance and chief analyst of the Center for Business and Economic Insight in the Sentry School of Business and Economics at the University of Wisconsin-Stevens Point.