Here’s the story. Originally Social Security had its own lock box. The money was just sitting there. During the Reagan administration, it was decided to let the General Fund of the U.S. Treasury borrow the funds from SS and then pay interest on what they borrowed. This was a win-win. The U.S. government had more money to spend, and Social Security would earn interest on the money it loaned out to the government. These funds are in the form of special bonds, which the government is required to pay back. They also earn interest for the Social Security Trust Fund.
Currently, the combination of yearly employee contributions and the yearly interest on the money it has lent the government is more than what it spends on payments to retirees. There is a surplus.This will be true through 2021. At that time it will begin to spend the money from contributions that has built up in the Social Security Trust Fund. This extra money is projected to run out in 2034, at which time Social Security will only be able to pay out ¾ of an individual’s earned benefits.
There are a number of ways to solve this problem.
Raising the retirement age is one. Slowing the percent of inflationary increases in benefits is another. These measures will lower the total amount of money a contributor gets back.
Another solution is to raise the income level at which a worker ceases to contribute to FICA. This year workers do not have to pay into FICA for the money they earn above the $128,400 taxable maximum. Some have suggested getting rid of this cap on contributions. Watch the news for proposed legislation which will strengthen or weaken the program.
Every year, Social Security pays out about $768.6 Billion to beneficiaries through the Old Age and Survivors’ Insurance (2016 data). Nearly 60 million persons receive those benefits.
The most recent estimates of what it would cost to repeal the GPO/WEP, which affect about 2.5 million people, have been about $10 Billion each year. We don’t have good recent figures for the cost, but a possible current estimate, increasing the estimated cost of repeal by 50%, gives you only a cost to the Social Security Administration of about 2%. And that 2% is returning our money!
Don’t let anyone tell you that Social Security can’t afford to repeal the Government Pension Offset and the Windfall Elimination Provision!