CBO: Social Security Trust Funds Could Be Exhausted by 2033

The non-partisan Congressional Budget Office The Social Security Program’s long-term projections for the solvency of Social Security were updated last month. They found that the trust funds are likely to be exhausted in 2033.

The CBO’s analysis If the projected gap between outlays from trust funds and revenue is forecasted, the balance in trust funds will reach zero by 2033. This would mean that the Social Security Administration won’t be able retire full benefits.

CBO determined that the Old-Age Insurance Trust Fund and Survivors Insurance Trust Fund would run out in 2033, and the Disability Insurance Trust Fund in 2048. Combining the trust funds would result in the exhaustion date being set for 2033.

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On October 14, 2021 in Washington, D.C., a Social Security card is placed alongside U.S. Treasury checks. (Kevin Dietsch / Getty Images / Getty Images)

Federal spending on Social Security As the percentage of Americans over 65 years old has increased, the trend has been upward. As a result, the trust funds have been squeezed as their remaining balances are used to supplement payroll tax revenue to pay full benefits to retirees.

The CBO sees this trend remaining in the decades ahead with spending on the program rising from 5% of U.S. gross domestic product to 7% in 2096 – while revenues would remain at around 4.6% of GDP over that same period. The structural deficit will cause trust funds to run dry in the coming decades, barring reforms that strengthen Social Security’s finances.

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A sign is visible outside a U.S. Social Security Administration (USSSA) building in Burbank. (Valerie Macon / AFP through Getty Images / Getty Images

CBO’s 75-year forecast showed that Social Security had an actuarial deficit of 1.7% GDP. That is, 4.9% of the taxable payroll. The CBO found that Social Security trust funds balances could be maintained up to 2096 if there were either an immediate and permanent increase of payroll tax rates by 4.9% or an equivalent reduction of benefits, or a combination tax increases and benefit cuts.

CBO also examined what was being analysed. Social Security benefits After the 2033 expected exhaustion, what would the trust funds look like? 

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As a backdrop, the U.S. Capitol can be seen from Social Security checks. (iStock / iStock)

The study found that benefit payments for Social Security would be approximately 23% lower than the 2034 benefits. This gap will grow as time passes with the payable benefits becoming 35% smaller by 2096.

The current law doesn’t allow for a formula to reduce Social Security benefits below what is payable based only on payroll tax revenue. This creates uncertainty over what the SSA might do and how lawmakers will respond before trust funds run dry.

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CBO’s analysis of the scenario where Social Security benefits are limited to what is payable based on inflow revenue showed that younger age groups would experience the most drastic changes to their initial benefits as well as lifetime benefits. They generally won’t start receiving payments until after the trust funds have exhausted.

• Cohorts of beneficiaries who were born in the 1950s, 1960s, and 1960s will see little or no change to their initial benefits. However, their lifetime benefits will be reduced by 9% to 19%.
• Initial benefits for beneficiaries who were born in the 1970s or 1980s and 1990s would be cut by 24% and 27% respectively, while lifetime benefits would decrease by 26%, 27%, and 27%, respectively.

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