Social Security Trust Funding Gains Year to 2035

A strong job market has helped buy the Social Security Trust Funds another year, according to the annual report from the Social Security Board of Trustees report released Monday. The combined asset reserves of the Old-Age and Survivors Insurance and Disability Insurance Trust Funds are forecast to have enough revenue to pay all benefits and associated administrative costs until 2035, one year more than projected last year.

Without Congressional action, the funds are projected to be depleted in 2035, with income sufficient to cover 83% of scheduled benefits, according to the board of trustees’ report.

The news of strengthened funding in part on the robust job market and wage growth comes as the Federal Reserve considers whether these relatively strong indicators, in addition to persistently strong inflation, should keep it from planned interest rate cuts this year. Decisions around Social Security have also been the subject of campaigning ahead of the November elections, with outcomes for the presidency and Congress potentially having an impact on the benefit.

According to this year’s report, the combined trust funds dropped by $41 billion in 2023 to a total of $2.788 trillion. Meanwhile, the total annual cost of the program is projected to exceed total annual income in 2024 and remain higher going forward; total costs began to be higher than total income in 2021.

“Congress can and should take action to extend the financial health of the Trust Fund into the foreseeable future, just as it did in the past on a bipartisan basis,” Martin O’Malley, Commissioner of Social Security, said in a statement. “Eliminating the shortfall will bring peace of mind to Social Security’s 70 million-plus beneficiaries, the 180 million workers and their families who contribute to Social Security, and the entire nation.”

Social Security paid total benefits of $1.379 trillion in 2023 to about 67 million beneficiaries, with total expenditures of $1.392 trillion. Meanwhile, an estimated 183 million people had earnings covered by Social Security and paid payroll taxes, leading to total income, including interest, of $1.351 trillion in the year.

The combined trust fund asset reserves earned interest at an effective annual rate of 2.4 percent in 2023.

The projected actuarial deficit over the 75-year long-range period is 3.50% of taxable payroll, according to the report. That is lower than the 3.61% projected last year.

The board did note that, when taken separately, the OASI trust fund alone would be depleted in 2033. It also found that the ratio of reserves as compared to annual cost is projected to drop from 188% at the beginning of 2024 to just 84% at the start of 2030, staying below 100% for the next 10 years. Because of that ratio drop below 100%, the trust funds will fail the board’s test of short-range financial adequacy.

The Social Security board has space for six members, with four currently serving due to their position in the Federal Government: Janet Yellen, Secretary of the Treasury and managing trustee; Martin O’Malley, commissioner of Social Security; Xavier Becerra, Secretary of Health and Human Services; and Julie Su, acting Secretary of Labor.

Two public trustee positions are currently vacant.