In a recent Marketwatch article, writer Andy Landis provides an overview of the most recent Social Security Board of Trustees report which dismisses many rumors about the depletion of Social Security over the next 20 years. In July 2014, the board gave its annual report which brought about some interesting findings. Social Security currently has $2.76 trillion in trust fund reserves that will continue to grow until 2019. It is projected that by 2020, costs of the program will exceed the income from payroll taxes which will be covered by this trust fund reserve. As projected in the past, this means that trust funds will be depleted by the year 2033.
Despite these figures, there is a very important distinction to make. Even after 2033, Social Security will still be able to pay 77% of its scheduled benefits from payroll taxes for most of the remaining century. Many have been led to believe that Social Security will not be available once the trust fund reserves are depleted in 2033.
A quick look back at history shows that in the late 1970s and early 1980s, Social Security was in a more precarious situation running annual deficits. It was projected that by mid-1983, the trust fund would be depleted. Congress passed a bill in early 1983 that overhauled the entire system which is the same plan that Social Security operates under today. To further prove the worth of the 1983 plan, it projected that the system would have 50 years of solvency before trust fund assets would be depleted which is right on pace with the current assumption of 2033. Despite the negative publicity, Social Security is not on the brink of demise. However, if Congress wants to protect against the cut to 77% in 2033, another reform will need to occur.