10 Things Social Security Won’t Tell You

The truth about the agency’s bottom line

Market Watch

1. “Long-term deficit? We can hardly afford our bills today.”

About a third of workers in their 50s expect Social Security benefits to be their primary source of income in retirement, according to the Transamerica Center for Retirement Studies. That reliance gives pre-retirees reason to worry about the future of the program. The Social Security Administration itself has said that unless something is done to reform the system, it will have to reduce benefit payments to retirees within the next few decades.

Less talked about, perhaps, is the concern that the program is having a hard time paying its bills today. In 2010, the Social Security Administration began collecting less revenue in taxes than it needs to cover benefit payments, forcing the agency to tap its $2.7 trillion trust fund sooner than some had expected. It was the first time since 1983 that expenditures had exceeded noninterest income, and the shortage is expected to continue. “It’s almost like a family running huge deficits throughout their budget,” says Eugene Steuerle, an economist with the Urban Institute, a nonpartisan think tank in Washington, D.C.

A Social Security spokeswoman points out that interest income from the Treasury bonds held in the trust fund will allow it to keep growing until 2020—even if the agency has to siphon off some money to offset shortages in tax revenue. The fund won’t be exhausted until 2033, around the time Gen Xers are expected to begin retiring. But that is already a few years earlier than previous projections. After that, the agency says, tax income under the current system will only cover about three-fourths of benefit payments through 2087. 

2. “Disabled? A benefit cut is coming your way soon.”

The number of workers collecting disability benefits through Social Security has spiked in recent years, hitting 8.9 million in April, up 50% from 5.9 million in 2003, according to agency data. Some of that change can be attributed to demographic changes—as more women have entered the workforce over the past several decades, the number of people qualifying and collecting disability benefits overall has grown. As more baby boomers age, the population of people who might qualify for disability benefits is growing, economists say. And the expanded eligibility for people with psychiatric disorders has contributed to an increase in the number of younger people collecting benefits—a population that is also likely to stay in the system for a prolonged period of time, says David Stapleton, director for the Center for Studying Disability Policy at nonpartisan consulting firm Mathematica Policy Research. Other drivers include the slower economy: the number of people applying for and receiving disability benefits grew during the recession after some workers saw their jobs disappear or found that they qualified for fewer jobs after becoming disabled, says Stapleton. Plus, he says, some states are tightening eligibility for workers’ compensation and encouraging people to move onto the Social Security disability program, which is federally funded, to lower state costs for Medicaid and welfare programs. 

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