Page 44 - Investment Advisor - October 2021

Conclusions

RETIREMENT PLANNING
By Ginger Szala

Social Security Fund on Track to Go Bust by 2033,

But That’s Better Than Some Experts Expected

The trustees’ 2021 projection is a year earlier than last year’s estimate.

2022 from projected levels in the 2020
report, all affected the projections.
There is much uncertainty around the
exact impact of the pandemic, the trust-
ees state. A recent report from the Social
Security Administration stated that there
were nearly 400,000 more beneficiary
deaths in 2020 than in 2019, a 17% year-
over-year increase. It remains to be seen
the impact of these deaths on Social
Security payments, both in distribution
and in potential payroll tax revenue.
Indeed, Nancy J. Altman, president
he Social Security Old-Age and Security and Medicare will face long- of the advocacy group Social Security
Survivors Insurance Trust Fund term financing shortfalls under “cur- Works, told Investment Advisor in an
Tis on track to be depleted by 2033, rently scheduled benefits and financing.” email that “the rule of thumb is that eco-
a year earlier than estimated in 2020, Further, both will experience substan- nomic changes have the greatest impact
with 76% of benefits payable at that time, tial cost growth into the 2030s due to on the next five or 10 years, with demo-
according to the 2021 Social Security “rapid population aging.” graphic changes primarily affecting the
Board of Trustees’ report released in late The finances of both programs have long term. Consequently, a temporary
August, which typically comes out in April. been “significantly affected by the pan- increase in deaths among beneficiaries
The Disability Insurance Trust Fund, demic and the recession of 2020,” the should not change the long range out-
meanwhile, is projected to be able to report states. “Employment, earnings, look significantly.”
pay scheduled benefits until 2057, eight interest rates, and GDP dropped substan- The Trustees also mentioned lower
years earlier than last year’s projection. tially in the second calendar quarter of payroll tax income and lower revenue
At that time, the report states, the fund’s 2020 and are assumed to rise gradually from income taxation of benefits having
reserves will be depleted and continu- thereafter toward full recovery by 2023, some effect. Last year, President Donald
ing tax income will be able to pay 91% of with level of worker productivity and thus Trump issued an executive order signed
scheduled benefits. GDP assumed to be permanently lowered Aug. 8 declaring all payroll tax obliga-
Despite the Social Security’s trust by 1 percent even as they are projected to tions, which fund Social Security, would
fund reserves at the end of 2020 being resume their pre-pandemic trajectories.” be deferred through the end of 2020.
$2.9 trillion, having increased by $11 The Trustees also noted that elevated The action was intended to provide
billion, there were a variety of factors mortality rates related to the pandemic relief for taxpayers amid the COVID-19
driving the estimate, the Trustees state. through 2023, as well as reductions in pandemic. However, those tax funds had Adobe Stock
The report notes that both Social immigration and childbearing in 2021- to be paid back by April 30, 2021.

42 INVESTMENT ADVISOR OCTOBER 2021 | ThinkAdvisor.com