The Social Security and Medicare boards of trustees dropped a bombshell Friday, saying the primary trust fund used to pay retirement benefits is now projected to become depleted in 2033 — one year sooner than was estimated last year.
At that time, income from payroll tax revenue is expected to fund 77% of scheduled Social Security benefits, according to the latest report.
Several factors have weakened the already precarious financial position of the retirement trust fund, including lower projected economic growth and greater longevity among beneficiaries, according to several Social Security experts.
Two consecutive years of high cost-of-living increases (5.9% in 2022 and 8.7% in 2023) have also caused some additional erosion in trust fund solvency, says Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League.
However, Johnson says a lower cost of living adjustment (or COLA) is likely next year, and she emphasizes that Social Security "remains very fixable."
In fact, Johnson and others are encouraging financial services professionals to work to dispel key misconceptions about the Social Security program, both with respect to its solvency and the best ways to maximize benefits.
"Reviewing the report, I notice the intermediate COLA forecast is 3.3% for 2024, and the 'low' forecast is 3.1%," Johnson said. "Those are in line with CPI-W data through February 2023, but the COLA in 2024 may be lower than the trustees forecast." (The CPI-W index tracks retail prices as they affect urban hourly wage earners and clerical workers.)
Each month, Johnson estimates the past 12-month average inflation rate of the CPI-W and then projects third-quarter inflation for 2023 — which will be used to determine the 2024 COLA.
