Social Security Warning Issued: 'Heading for Trouble'

A financial expert has warned that the Social Security program is "heading for trouble," despite a new report indicating the benefit program is doing well.

On Monday, the Social Security Administration (SSA) published its annual Trustees Report, which found the government retirement and disability benefits program has fared better than expected over the last year due to the improving economy. The expected depletion date of the program's Old-Age, Survivors, and Disability Insurance (OASDI) fund has now been pushed back to 2035, based on the combined reserves of the retirement and disability benefit trusts—one year later than previously projected.

If the funds become depleted, the SSA predicts that in 2035, there would only be enough money to pay 83 percent of scheduled benefits at current rates.

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"We are certainly heading for trouble without some kind of action, as borrowing costs will be gigantic to continue to fund the Social Security program at current (or increasing with inflation) levels," John Sedunov, professor of finance at Villanova University in Pennsylvania, told Newsweek.

Sedunov said that in the run up to the 2024 presidential election this November, neither Republicans or Democrats are likely to want to make cuts to the program to save it from insolvency. "I don't think either of the two parties—Donald Trump or Joe Biden—wants to be the one to make cuts, heighten requirements for the program, or increase taxes to pay for it—but something has to give," he said.

"I can certainly also see total inaction from the politicians in the coming year or two, as both seek to kick the can down the road for political benefit."

In a statement issued following the report's release, Biden said: "As long as I am president, I will keep strengthening Social Security and Medicare and protecting them from Republicans' attempts to cut benefits Americans have earned."

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Earlier this year, House Budget Committee Republicans issued a budget proposal that included support for a fiscal commission that would cut future spending on welfare and healthcare programs.

In its report, the SSA itself warned policy changes are needed sooner rather than later to keep the program solvent. "Congress can and should take action to extend the financial health of the Trust Fund into the foreseeable future, just as it did in the past on a bipartisan basis," Martin O'Malley, commissioner of Social Security, said in a press release issued on Monday.

"Eliminating the shortfall will bring peace of mind to Social Security's 70 million-plus beneficiaries, the 180 million workers and their families who contribute to Social Security, and the entire nation."

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Groups that advocate for the preservation of the nationwide program have also urged lawmakers to take swift action. "The 2035 depletion date means Congress must act NOW to strengthen Social Security for the 67 million Americans who depend on it," the National Committee to Preserve Social Security and Medicare said in a statement seen by Newsweek. "We cannot afford to wait to take action until the trust fund is mere months from insolvency, as Congress did in 1983. The sooner Congress acts, the less painful the remedies will be."

Regardless of what action is taken to solve the looming insolvency, PlanPrep retirement expert Burt Williamson previously predicted that the process of fixing the issue is likely to be similar to the last time the SSA faced a dire funding cliff the early 1980s. At the time, a bipartisan commission set up by former President Ronald Reagan delivered plans to shore up the SSA's solvency well into the 21st century.

"Fast forward into the future, and the president at that time likely will have to appoint a new commission—history repeating itself—to come up with new findings that will give Congress another way to avoid blame for the changes that will be made," Williamson told Newsweek.