The Treasury Department recently released its annual government report last week stating that the trust funds for Social Security benefits have been affected by the COVID-19 pandemic. As a result, the trust funds will run out of money earlier than expected. Once that happens, there will be a possibility of reducing future benefits received by those eligible.
In a recent case study by CNBC, it was reported that on average, a Social Security beneficiary gets $1,544 monthly. Now, one of the possibilities being looked at by experts is a 21 percent reduction in the benefits. If this will be applied, current beneficiaries will see the average monthly benefit decrease to $1,221. That’s a $324 drop per month or $3,888 per year.
The two trust funds relied upon by Social Security for the benefits given out are the Old-Age and Survivors Insurance and the Disability Insurance.
The Old-Age and Survivors Insurance is more of a concern as it is expected to pay only 76 percent of the benefits by 2033, a year earlier than the annual government report released in 2020.
Aside from the 21 percent decrease in average Social Security benefits, a tax increase is another possible fix for this dilemma. However, with this solution comes many changes that need to be dealt with by lawmakers, experts say. Congress is yet to make a move and an announcement on how they will handle such.
Although COVID-19 is the primary reason why the trust funds are to run out of money earlier than expected, another reason is that more baby boomers are exiting the workforce. Soon those exiting will exceed the number of those entering. Hence, Social Security will owe more benefits than the money they collect via payroll tax revenue.
