The Social Security actuarial report contains this bad news

The latest report on the financial situation of the social security system, published this week, is a silver lining in a very dark cloud.

Yet most of the snap reactions and quick grabs from the financial media focused on that silver lining and ignored the dark cloud. And that’s a shame. By concluding that the Social Security Trust Fund is not in as dire a state as many worried during the early dark days of the pandemic, this latest report may relieve pressure on Congress to adopt the necessary changes.

And there is no doubt that Congress must act, and there is also no doubt that the longer Congress waits to do so, the more painful the remedies will have to be. So the “good news” contained in the latest report could end up being bad news in disguise.

This week’s report to which I refer comes from the office of the chief actuary of the social security system on the financial situation of the social security program. Many in the world of financial planning for retirement await with great anticipation each year’s update, paying particular attention to the Chief Actuary’s latest estimate of when Social Security trust funds will be depleted and, if no changes are made by then, how much less Social Security recipients will subsequently receive than is due to them.

In this week’s report, the chief actuary predicted that the combined trust funds for Old Age and Survivors (OAS) and Disability Insurance (DI) would run out of money in 2035, a year later. than predicted in last year’s report, published in August. As you can see from the attached chart, this brings the trust fund depletion year back to what it was before the pandemic.

From 2035, the report also concludes, recipients will receive only 80% of the amounts to which they are otherwise entitled, unless changes are made to the financing of Social Security. That’s up from 78% in last year’s report.

Why improvement? The Chief Actuary identifies several sources, but perhaps the most important is that “the economic recovery from the brief 2020 recession has been stronger and faster than predicted in last year’s report”. This improvement translates into an increase in payroll taxes paid to Social Security.

You can almost hear the sighs of relief in congressional circles that the two-year worst-case scenarios have not happened. An actuarial analysis from the summer of 2020 had projected that due to the pandemic, OASDI’s trust funds would run out by 2026. That’s only four years from now, and maybe – just maybe – even Congress would have been compelled to take action if this latest report would have confirmed that exhaustion date in 2026.

The nine extra years from 2026 to 2035 is a lot of rope with which Congress can hang itself, however, and it’s the dark cloud surrounding the silver lining of this week’s report.

As the chief actuary notes in the report, “If substantial action is deferred for several years, the changes needed to maintain Social Security’s solvency would focus on fewer years and fewer generations. Much larger changes would be required if action were postponed until the combined reserves of the trust fund were exhausted in 2035.”

Martha Shedden, co-founder and president of National Association of Registered Social Security Analysts, shares the actuary’s concern. The good news in the latest report ‘DOES NOT REDUCE the urgency to act NOW to strengthen the SS fund,’ she wrote in an email, adding that she feared Congress would react to the good news. by being more of a procrastinator than them. already are.

The bottom line? The depletion of Social Security trust funds is a slow moving freight train heading straight for us all. While the Social Security actuary’s latest report alleviates previous concerns about the speeding train, that doesn’t mean it’s not happening yet.

We should all urge our elected representatives from both parties to immediately begin working together on the changes needed to keep social security funds solvent.

Mark Hulbert is a regular MarketWatch contributor. His Hulbert Ratings tracks investment newsletters that pay a fixed fee to be audited. He can be contacted at