The chief actuary for the Social Security Administration, Stephen Goss, marked a dire occasion in his testimony before Congress on Thursday: Social Security payouts are exceeding income for the first time in the program's history.
Although ominous, the revelation is not particularly surprising. Economists have long warned that the wave of baby-boomer retirements and lengthening American life expectancies would soon cause the program to run in the red and dip into its reserve fund. According to most recent estimates, that reserve fund will be depleted in 2034.
During his testimony, Goss warned that Social Security's financial future looks more bleak every year.
In his introductory remarks, Rep. Sam Johnson (R-Texas), chairman of the Social Security Subcommittee, noted: "In 2011, the trustees told us that the Social Security trust fund would be exhausted in 2036. This year's report says the date is now 2034 ... also back in 2011, the trustees told us that it would take $6.5 trillion to make Social Security solvent over the next 75 years. This year, the trustees tell us that it would take $13.2 trillion, more than twice that number."
If the reserve fund is depleted, Social Security recipients will see an automatic reduction in their monthly benefits. According to current estimates, the Social Security Administration believes it can pay out benefits at a 79 percent rate through 2090.
It is highly likely, however, that Congress will refuse to pay the political price of such a substantial cut in monthly benefit checks, and will instead either sharply raise payroll taxes or reduce benefit payouts by increasing retirement age or instituting means testing for recipients.
Recent studies also indicate that many Americans are not saving enough for retirement even if Social Security benefits aren't reduced. According to a recent study commissioned by Bankrate, over 60 percent of Americans do not know how much they will need to retire, and a rising number of Americans believe they will never retire.