3 Social Security Shockers From the CBO's Latest Report
On Tuesday, The Congressional Budget Office updated its annual projections on the health of Social Security and its Trust Funds. In essence, if you're still working and you're depending on that program to cover your retirement -- you'll be in for a shock. Or three.
Shocker No. 1: It's failing faster than even last year's dire projection.
The table below shows the CBO's projections for combined Social Security Old Age, Survivors, and Disability Insurance Trust Fund balances, with the 2012 column showing its projections as of Jan. 2012 and the 2013 column reflecting the current update:
Year | 2012 Projection | 2013 Projection | Difference |
|---|---|---|---|
2012 | $2,709 | $2,719 | $10 |
2013 | $2,743 | $2,748 | $5 |
2014 | $2,762 | $2,762 | $0 |
2015 | $2,775 | $2,766 | ($9) |
2016 | $2,791 | $2,767 | ($24) |
2017 | $2,807 | $2,764 | ($43) |
2018 | $2,818 | $2,758 | ($60) |
2019 | $2,817 | $2,741 | ($76) |
2020 | $2,802 | $2,706 | ($96) |
2021 | $2,768 | $2,652 | ($116) |
2022 | $2,713 | $2,573 | ($140) |
2023 | N/A | $2,468 | N/A |
Data from the Congressional Budget Office. Dollar amounts in billions.
Based on that newer projection, the combined Trust Fund is expected to:
Peak two years earlier -- in 2016 rather than last year's 2018 projection.
Have $140 billion less in 2022 than projected for that same period just last year.
Drain an additional $105 billion in 2023 alone -- just one decade from now.
The bad news from last year's CBO projection foretold the three-year shift forward in the projected collapse date of the combined Trust Fund in the 2012 Social Security Trustee's Report. This year's downgrade suggests that last year's 2033 collapse date will likely once again be revised closer -- to 2032 or perhaps even sooner.
That 2032 D-Day is less than two decades away, putting it well in the expected lifespan of typical current workers -- and even of some current retirees.
Shocker No. 2: Social Security spending will nearly double over the next decade.
Not only is the trust fund running out faster than anticipated, but spending is on track to skyrocket -- nearly doubling over the next decade to $1.4 trillion from last year's $0.8 trillion.
The table below shows the gory details:
Year | OASI Projection | DI Projection | Combined Projection |
|---|---|---|---|
2012 | $627.2 | $135.1 | $762.3 |
2013 | $664.0 | $141.3 | $805.3 |
2014 | $700.9 | $147.6 | $848.5 |
2015 | $741.7 | $154.4 | $896.1 |
2016 | $787.0 | $160.5 | $947.5 |
2017 | $835.9 | $166.1 | $1,002.0 |
2018 | $888.7 | $172.0 | $1,060.7 |
2019 | $945.7 | $178.5 | $1,124.2 |
2020 | $1,007.1 | $185.4 | $1,192.5 |
2021 | $1,069.2 | $194.6 | $1,263.8 |
2022 | $1,134.3 | $203.8 | $1,338.1 |
2023 | $1,203.1 | $213.3 | $1,416.4 |
Data from the Congressional Budget Office. Dollar amounts in billions.
Combine the rapidly shrinking trust fund with the escalating expected expenses, and the ugly future becomes abundantly clear. Either taxes are going to skyrocket to cover the costs, or benefits will need to be cut. Neither option looks all that good to anyone who expects to be working more than a decade or so from now.
Shocker No. 3: Disability claims are high -- and rising.
The charts below shows the percentage of working age people by age bracket that are on disability:
Charts from the Congressional Budget Office.
Not only has the percentage of working-age people on disability across nearly all age groups risen fairly steeply over the past two decades, but the CBO is also projecting the levels to continue rising.
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People on Social Security Disability generally aren't working -- and if they are working, they usually aren't earning much in the way of reliable income . As a result, the CBO's projection suggests fewer people will be paying into the system, while more receive benefits from it.
That's not a sustainable situation. It's especially not sustainable when combined with the rapidly shrinking Social Security Trust Funds and the country's quickly aging population.
The Bottom Line
The three shockers from the CBO paint a dire picture, indeed: Social Security's combined Trust Fund is collapsing quicker than anticipated, Social Security costs will nearly over the next decade, and Social Security disability claims are high and still rising.
Take it all together, and it's a stern warning of a pending financial catastrophe for a program that over 50 million Americans currently rely on -- and nearly everyone working in the country expects to receive.
More from the Retirement Center:
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