Each year the trustees of the Social Security system give the public an update on the system’s financial status. NC State University economist Mike Walden gives an update on their 2016 report.
“It’s a mix of good news and bad news. The good news is that Social Security right now has a substantial savings account — let’s call it a reserve fund — $2.8 trillion. Now many people say that that’s meaningless because that’s in non-tradable government bonds. But the federal government has never not honored those bonds, so I take that number as a hard number. So that’s the good news. And also another piece of good news is that the accountants at the Social Security system will continue to take in more money than it takes in until 2019.
“But then that’s the end of the good news, because after 2019, the system will start paying out annually more than it’s taking in, so they will start eating into that $2.8 trillion reserve fund. And the estimate right now is that reserve fund will be gone by 2034. And so after 2034, Social Security will still be able to make payments based on the money they are taking in, but they won’t be able to make the payments that they promised. That is, they are just simply not going to have enough money.
“So we do have a looming issue in Social Security, and the big question is, what happens after 2034? Will benefits be cut back? Will more money be allocated to Social Security? That’s really the question, and the sooner we address that question, the better off the system will be.”