Social Security Is In Worse Financial Shape Than Official Estimates Show, Penn Researchers Warn
The financial condition of the Social Security Trust Fund is likely to deteriorate faster than official projections show, according to a study released today by University of Pennsylvania researchers using what’s known as the Penn Wharton Budget Model. Among other things, the Penn researchers predict the fund is likely to be completely depleted in 2032, rather than in 2034, as the latest report from the Social Security Trustees forecasts.
The reason for the difference? According to the Penn group, the Trustees’ projections don’t fully reflect the impact of changing economic conditions, and most particularly, the growing federal debt. (In the wake of the Trump tax cuts and recent spending deals, that debt is projected to grow significantly as a percentage of GDP.)
“Increased national debt reduces resources available for private investment, thereby reducing the size of the wage base that is used to finance Social Security benefits,” the authors explained.
If and when the Trust Fund goes insolvent, money would still be coming into Social Security through payroll taxes. But under current law those taxes would be enough to pay retirees only about 80% of promised benefits.
A separate report issued today by the Penn group shows, not surprisingly, that it is lower income seniors who are at the greatest risk should an across-the-board benefits cut take place. As of 2012, retirees in the lowest income quartile depended on Social Security for roughly 90% of the total money coming into them. “Those in the highest quartile, by contrast, receive only about 10 percent of income from Social Security benefits,” noted the study.