(PresidentialDaily.org) -The 19FortyFive website reports that last week, the Congressional Budget Office (CBO) issued a warning that the budget would begin to run short of money a year sooner than projected, in 2032.
Social Security’s insolvency date, also known as the “exhaustion date for the trust fund,” is now inside the budget range, CBO Director Philip Swagel told reporters this week. He cautioned that without modifying the legislation, beneficiaries might face a drop in payouts of up to 20 percent if the funds went bankrupt.
Of particular concern is that the CBO recently predicted that the cut may begin in 2033. Nevertheless, the forecast had to be revised when a hefty COLA was revealed late last year. Because of the country’s spiraling inflation, the Social Security Administration awarded an 8.7 percent rise in October, the highest COLA increase in 40 years.
According to Swagel, the inability of the Social Security trust fund to pay out promised payments is due to rising inflation and subsequent high cost-of-living adjustments (COLAs). Ultimately, it made things worse for the system, pushing our exhaustion date into the budget window by one year.
Consequently, the grandparents of Generation X and their Boomer cousins are now receiving a higher Social Security payment than they previously received.
The silver lining is that if inflation is high enough, wage growth will follow suit, and that will help the Social Security system, which is funded by individual income taxes, stay solvent. Projections show that the United States population will grow from 336 million in 2023 to 373 million in 2053. More people in the workforce equals more taxes, which means more money for social security.
Not only will Social Security not go bankrupt, but it will continue to exist for the foreseeable future. The problem was that beginning in 2021, Social Security payments started to exceed tax revenues.
It must withdraw cash from two trust funds totaling $2.9 trillion. The Disability Insurance (DI) trust and the Old Age and Survivors Insurance (OASI) trust are a part of this. The OASI trust is projected to be emptied by 2033, meaning payroll taxes could support about 77% of promised retirement and survivor payments after that year.
The entitled members of Generation Z and the Millennial generation may have cause for concern. Members of Generation X might want to increase their savings rates and delay retirement by a few years.