LEILA FADEL, HOST:
The Social Security Trust Fund is expected to run out of cash in eight years, according to a new report.
STEVE INSKEEP, HOST:
Unless Congress acts before then, benefits for millions of retirees would be cut by 23%.
FADEL: NPR's Laurel Wamsley is here to talk with us about what this all means. Good morning, Laurel.
LAUREL WAMSLEY, BYLINE: Good morning, Leila.
FADEL: OK, so this really doesn't sound like good news for retirees and Americans who hope to retire someday. So how did the country get to this point?
WAMSLEY: Yeah. Well, this is a long-running concern, and now we know it's gotten a bit worse, according to this new report from the program's trustees. Like you said, the Social Security Trust Fund is expected to run out of cash eight years from now. That's early 2033. And it's a bit sooner than previously expected. That's largely because of this new law that increased benefits for nearly 3 million workers who get pensions, like teachers, firefighters and federal employees.
Those increased benefits mean the trust fund will be depleted sooner. And the trust fund is where Social Security taxes and other income are deposited. Now, Social Security retirement benefits are largely pay as you go. The money for today's retirees come from the payroll taxes of today's workers. For a long time, over three decades, there was more money going in than coming out. But in 2021, that changed, and Social Security started redeeming the trust fund's reserves.
FADEL: OK, so you said it changed in 2021. What caused the need to dip into those funds?
WAMSLEY: Well, demographics changed. The population of the U.S. is aging. More than 11,000 baby boomers turn 65 every day. And for each person who's drawing Social Security, there are now fewer young workers paying taxes to support the system. For now, the trust fund works as a backstop, but once it's depleted, there won't be enough coming in to cover the full amount of promised retirement benefits.
FADEL: OK, so when the trust fund runs through its reserves, do people's benefits just disappear?
WAMSLEY: No, but they would be cut significantly. Retirees would receive just 77% of their promised benefits, and that percentage would continue to decline to 69% by the end of the century. And that matters because Social Security benefits are the largest source of income for most retirees. And, you know, this news is coming just as there's been an 18% spike in Social Security claims so far this year.
FADEL: Oh, wow. I mean, what's behind that spike?
WAMSLEY: Well, some of it is because baby boomers are hitting retirement age and because of that new law affecting people with pensions. But there's another reason I heard from a lot of folks filing sooner than they'd planned - that they're worried about their future. I spoke with Bill Armstrong in Berthoud, Colorado. He moved up his date to file for Social Security. He's fighting cancer and has had a hard time finding work. He said he knows plenty of other people claiming right now.
BILL ARMSTRONG: We're worried that we're not going to get it, it's going to be taken away, so we better get it while we can.
FADEL: So what can be done about the shortfall in Social Security funds?
WAMSLEY: Congress could raise taxes, they could cut benefits or some combination of the two. Currently, for instance, people don't pay Social Security taxes on any income above $176,000 a year. To help fill the gap, Congress could change that. If no changes are made, though, benefits will be cut automatically when that trust fund runs out.
FADEL: That's NPR's Laurel Wamsley. Thank you, Laurel.
WAMSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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