The recent annual report from the Trustees of Social Security and Medicare estimated that the trust fund backing Social Security retirement benefits will run out of money in 2033.
But that might not be the end of the story.
There’s a second trust fund that supports Social Security disability benefits. Not long ago that trust fund was estimated to be in danger of running out of money long before the retirement trust fund.
But changes were made in disability claiming procedures that resulted in far fewer people being granted Social Security disability benefits. Now, the disability trust fund is in good shape and is estimated to last much longer than the retirement trust fund.
The trustees report the results of the two trust funds separately, but they also report the results of the combined trust funds as though they were one entity supporting the two programs, retirement and disability.
This is important because the law allows the Social Security system to tap one trust fund to pay benefits for the other program if needed.
If Congress doesn’t act before the retirement trust fund runs out of money in 2033 or so, benefits won’t have to be reduced automatically. Instead, the trustees are authorized under the law to use money from the disability trust fund to pay benefits for the retirement program.
In the annual report, the trustees projected that if this is done the combined trust fund would last until about 2044. After that, of course, both trust funds would be empty and Congress would have to shore up both programs or reduce benefits.
Tapping the disability trust fund wouldn’t be a great solution, but the option should give additional comfort to those who worry their retirement benefits would be eliminated or cut after 2033.
Keep in mind, as I’ve pointed out in the past, that the demise of either trust fund doesn’t mean the Social Security program would disappear and benefits would cease being paid.
The Social Security program collects payroll taxes and self-employment taxes from working Americans. Those taxes will continue to roll in and pay future benefits.
The trustees estimate that the taxes will be sufficient to pay 75% to 80% of promised benefits for at least 75 years. If Congress doesn’t act, once the trust funds are exhausted all benefits would be cut automatically by the amount of the shortfall. But most of the promised benefits will be paid even after the trust funds are empty.