It’s been a wild November and a challenging year for all of America. Amid the unprecedented coronavirus disease 2019 (COVID-19) pandemic, which brought about the worst recession we’ve seen in decades, Americans decided on the path our country will take moving forward. Following a hard-fought election, former vice president and Democratic Party challenger Joe Biden is set to become our nation’s 46th president on Jan. 20, 2021.
Though Biden will have to tackle a number of challenges in his four years in the Oval Office, none may be more daunting than fixing Social Security.
Social Security has a $16.8 trillion problem
For more than 80 years, Social Security has, without fail, made guaranteed payments to eligible retired workers.
Today, almost 65 million people are receiving a monthly benefit, 46 million of whom are retirees.
The problem is, Social Security isn’t in great financial shape. The latest Social Security Board of Trustees report has projected that the program will expend more than it collects in 2021.
If accurate, this would represent the first net cash outflow for Social Security since 1982.
The bigger issue is that this isn’t a one-off event. These outflows are expected to exponentially grow in size as a myriad of demographic changes take shape. By 2035, the program’s $2.9 trillion in asset reserves (i.e., net cash surpluses built up since inception) are forecast to be exhausted.
If these reserves are completely depleted, sweeping benefit cuts of up to 24% may be needed for retired workers to maintain program solvency through 2094. That’s not an ideal scenario for a program that seniors are reliant on.
Between 2035 and 2094, the Trustees estimate that there will be a $16.8 trillion funding shortfall in the program that will need to be addressed by lawmakers.
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