COVID-19 Accelerates Depletion of Social Security Funds

COVID-19 Accelerates Depletion of Social Security Funds

(HorizonPost.com) – The Social Security Administration (SSA) was created in 1935 during the tenure of President Franklin D. Roosevelt (FDR). Its establishment was a means of ensuring that Americans 65 years of age and up would have an income stream during their retirement. In 1965, President Lyndon B. Johnson (LBJ) administration added the Medicare portion, and people were allowed to sign up for it starting July 1, 1966.

Today, it’s become a political football. The $2.6 trillion that’s supposed to be in the Social Security Trust Fund was drained by Congress since LBJ first included government-held trusts in the general budget. However, laws protect both Social Security and Medicare, making them “mandatory programs” that Congress must appropriately fund every year.

COVID Hurts Long-Term

Regardless of the smoke and mirrors our government uses to hide the “hows” and “whys,” the 2021 SSA Trustees Report says that the reserves on the retirement side of things will be depleted by 2034 without changes to the law — which is one year earlier than previously reported. It goes on to say that it’s expected to have enough reserves to provide full benefits until 2033. After that, they would be able to pay 76% each month. While some experts initially thought the COVID impact would be much worse, this news is certainly bad enough.

One of the big reasons for this loss in time is the COVID-19 pandemic and its effects on society. When the economy abruptly shrank, companies were looking to shed some of their biggest expense — payroll — which prompted some workers to opt for early retirement, increasing demand on the fund while reducing income because it relies on payroll taxes.

Another aspect is the new birth rate, which the virus is also impacting. Some experts anticipate a “baby bust” in 2021, with 300,000 fewer children being born. The researchers did warn that another round of school/daycare closures could impact that number. With the Delta variant on the rise, school systems across the country are already considering reverting to remote learning, at least temporarily.

In the end, all the numbers and predictions really come down to one thing. More people taking money out coupled with fewer people putting money in will have the same effect on the government as it does on an individual’s bank account.

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