WSJ: The Next Class of Senators Won't Be Able to Dodge the Social Security Crunch

In a recent Wall Street Journal article, Richard Rubin highlighted an important fact: the Social Security retirement trust fund is projected to become insolvent in late 2032, within the terms of the next class of senators.

By law, Social Security can only spend funds out of its revenues and trust fund reserves. Since 2010, its retirement program’s costs have outstripped its dedicated revenues, meaning Social Security has tapped into its trust fund reserves to pay full benefits. In less than seven years – in late 2032 – the retirement fund’s assets will be exhausted, when today’s 60-year-olds reach their normal retirement age and when today’s youngest retirees approach age 69.

Upon trust fund insolvency, all beneficiaries – both current and new – will face a 24% across-the-board benefit cut. For a typical couple retiring in 2033, this is the equivalent of $18,400 in lost annual benefits.

As Rubin writes:

The math is brutal for the program known for many years as the third rail of American politics. Social Security owes lifetime benefits to the huge generation of baby boomers who are already retired or almost there. That commitment locks in costs that are virtually impossible to dislodge and puts younger workers and future retirees on course for tax increases, benefit reductions or both.

At around the same time, Medicare’s Hospital Insurance trust fund will also go insolvent, requiring a 12% cut to Medicare hospital payments unless something is done to avoid it.

To prevent sudden cuts to benefits and payments, policymakers, including the next class of senators, will need to enact trust fund solutions that restore balance to Social Security’s and Medicare’s finances and ensure the programs remain solvent for the foreseeable future. Many thoughtful options exist.

Read the full piece here.