Social Security is running out of funds

Robert Reich - The trustees of the Social Security Trust Fund — of which yours truly was once a member — just released their annual report on Social Security’s future. The report says Social Security will be able to pay full benefits until 2034 but then faces a significant funding shortfall. After 2034, it can pay only about 80 percent of scheduled benefits.

The biggest reason Social Security is running out of money is not what you (and the media) think it is: that boomer retirees are, or will soon be, soaking it all up. The Social Security trustees anticipated the boom in boomer retirements. This is why Social Security was amended back in 1983, to gradually increase the age for collecting full retirement benefits from age 65 to 67. That change is helping finance the boomers’ retirement.

So what did the trustees fail to anticipate? Answer: the degree of income inequality in 21st century America. Put simply, a big part of the American working population is earning less than the Social Security trustees (including me) anticipated decades ago — and therefore paying less in Social Security payroll tax.