Take a look at the chart taken from the most recent Social Security Trustees Report. Some observers look at the net increase in reserves as a positive sign indicating a growing “surplus.” Reserves that are committed to paying accrued benefits are not a surplus.
Now add the total expenditures and subtract the income excluding interest and you see the reserves are being depleted by $40.5 billion a year. The only reason it shows an increase in reserves is because of interest paid by the federal government on the Treasury bonds held by the Trust. You can see that this is not sustainable as more and more of the interest must be used to pay benefits.
Also note that the disability fund is in worse shape than the OASI portion already decreasing the reserves.
Then we get to the point in a few years where the interest is insufficient and the bonds must be redeemed to pay benefits. In only 18 years, there are no bonds left in the Trust.
And about that Taxation of Benefits; many Americans who paid SS taxes all their lives now pay income taxes on those benefits and thus in one way are paying twice. You don’t have to be wealthy for this to happen.
file a federal tax return as an “individual” and your combined income* is between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
more than $34,000, up to 85 percent of your benefits may be taxable.
file a joint return, and you and your spouse have a combined income* that is between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits
more than $44,000, up to 85 percent of your benefits may be taxable.
* includes your Social Security benefit and non-taxable interest income as income
Categories: Social Security