FILE-In this photo illustration, a Social Security card sits alongside checks from the U.S. Treasury on October 14, 2021 in Washington, D.C. (Photo illustration by Kevin Dietsch/Getty Images)
The Congressional Budget Office (CBO) has recently released its annual funding report, revealing that the primary trust funds supporting Social Security retirement benefits are projected to be exhausted by 2034. This timeline is one year later than previously forecasted and aligns closely with the projections made by the Social Security trustees in their May report.
Key Solvency Insights
The CBO’s new report outlines its 75-year projections for the Social Security program. If outlays are limited to the revenue collected after the combined balance of the retirement and disability trust funds runs out in fiscal year 2034, benefits would be approximately 23% less than scheduled in 2035. By 2098, payable benefits could be around 28% lower than what is currently scheduled.
The report also projects a rise in Social Security spending from 5.1% of gross domestic product (GDP) in 2024 to 6.7% in 2098, driven by the increasing proportion of the population aged 65 or older. Meanwhile, the program’s revenues are expected to remain close to 4.5% of GDP throughout the 75-year period. Beyond 2098, the disparity between revenues and expenditures is projected to widen, leading to growing shortfalls.
The CBO report highlights that the Old-Age and Survivors Insurance Trust Fund is anticipated to be depleted by fiscal year 2033, while the Disability Insurance Trust Fund is expected to be exhausted by 2064.
Additional Findings
The report indicates that Social Security’s actuarial deficit over the next 75 years amounts to 1.5% of GDP or 4.3% of taxable payroll, which encompasses total earnings subject to the Social Security payroll tax.
Another significant point is that average initial benefits are expected to rise over time in real terms, accounting for inflation. For individuals born between the 1950s and 1990s, initial benefits are projected to replace more than one-third of pre-retirement earnings for retirees and more than half of average recent earnings for disabled workers.
