The Board of Trustee’s published their annual report on the state of Social Security. You can access a PDF copy of that report but don’t waste your time. I’ll give you a recap and hit on the main points below. But first, I wrote an article on when Social Security will run out. This article references the 2016 OASDI Trustee Report and guess what? Not a whole lot changed. The Social Security Trust is expected to be depleted by 2034. The Social Security asset account will be depleted at this point but Social Security will still be funded by payroll taxes. Social Security benefits will still be around after 2034, but we’ll either have to increase payroll taxes, decrease benefits, or a combination of both.

Highlights of the 2017 Social Security Trustee Report

Trust me – you don’t want to read the entire report. It’s written in bureaucratic prose and will put you to sleep faster than a glass of wine and a Xanex. Here are the highlights from the 2017 SS Trustee Report:

  • The OASDI was paying out benefits to 61 million people as of the end of 2016: 44 million retired workers, 6 million survivors, and 11 million disabled workers.
  • During 2016, 171 million people paid into Social Security via payroll taxes.
  • Total expenses were $922 billion and total income was $957 in 2016 (note the surplus).
  • The Social Security Trust (the SSA calls this the OASI Trust Fund*) had $2.85 trillion in assets at the end of 2016, an increase of about $35 billion from December 2015. These assets are held in special issue Treasury securities.
  • Reserves will continue to rise through 2021 because income is greater than expenses. At the beginning of 2022, reserves will be about $3 trillion.
  • Then from 2022 through the end of 2034, the Social Security Trust will be drawn from $3 trillion to ZERO. This is due to demographics (thanks baby boomers). Many folks will be leaving the workforce and drawing benefits. If you were born in the late-50’s / early-60’s, it’s time to retire soon.
  • Social Security will still have an income in 2034 so it’s not as bad as it seems. Social Security will have enough to pay 75% of scheduled benefits from its income alone in 2035.
  • Unfunded liabilities over a 75-year period equal $11.4 trillion as of the end of 2016. This increased from last year by about $700 billion.
  • To keep Social Security paying 100% benefits for the next 75 years, taxes will need to increase by 4 points from 6.2 to 10.2% of OASDI payroll tax OR benefits will need to be cut by 23%, OR some combination of both will work.

*There are actually two different funds that make up the Social Security Trust: the DI Fund and the OASI Fund. One is the disability insurance trust and the other is the old-age survivors insurance trust. We’re focusing on the Social Security Trust in this article. 

Can I Rely on Social Security to Pay Me? 

In short, yes! Social Security will continue to pay you for the foreseeable future. If you’re currently 62 years old and claimed Social Security this year, you can expect the same equivalent benefits until you’re 79. At that age, your benefits may be cut by about a quarter or your grand kids are going to have to stomach higher taxes. What do I think will happen? I think taxes are more likely to increase rather than benefits being cut. The reason for my thoughts on this is that we’re a society that doesn’t want granny to starve. Also, old people vote. Voters have power to change their politicians. No politician would stand a chance running on a platform to cut Social Security. There would be no support: the young don’t care and the old would be against it.

Trying to forecast benefits out a long period is extremely tough. Who knows what’s going to happen in the future. We’ll be in much worse shape if we have another bad recession. Fewer people will be in the workforce due to layoffs. That means less paid into Social Security. Higher rates of unemployment lead to higher rates of people on disability. They’re directly correlated. This will further draw down the Disability Trust. More people will retire early too (instead of being laid off and trying to find a new job, people will just file for SS). This will draw down Social Security faster. You can see how a strong economy is important for the future of Social Security.

Some Charts from the 2017 Social Security Trustee Report

The most important chart in the report shows you when benefits will need to be cut. You can see from this chart the drop off in benefits to be paid in 2034. If nothing is done, you can expect a smaller Social Security check in 2034.

2017 Social Security Trustee Report

Another interesting chart is the number of covered workers across time. This is how many workers there are per every one person on Social Security. A higher number is ideal. We’re going down which has a negative impact on Social Security’s financials.

number of covered workers

Another interesting chart is the chart that shows unfunded liabilities across time. The numbers on the y axis represent TRILLIONS. You can see we’re plus $3 trillion now and it’s all downhill from here (I hope your investment results don’t look like this!).

Social Security unfunded liabilities

And here is the comparison of balance as a percentage of taxable payroll from last year’s report to the 2017 Social Security Trustee Report:

social security comparison

Conclusion

There are no big surprises in the 2017 Social Security Trustee Report. Not many changes from last year’s report. You can expect to continue to receive Social Security at your current benefit amount until 2034. At that time, your benefits will either be cut or taxes will need to be increased. A combination of both benefit cuts and tax increases will also be an option. Even though Social Security is scheduled to run out of Trust money in 2034, the Program will still have an income. That income will be enough to continue to pay benefits at a lower rate after 2034. Another big recession will negatively impact the Social Security Trust Fund. More people will at the same time be pulling money out of the system and not putting money in the system.