Thus, changes need to be made to the Social Security Trust fund to maintain the viability of the system. Among those changes suggested are raising the employee-employer payroll tax and reducing retiree benefits, according to the results of the American Academy of Actuaries analysis of the 2003 Social Security Trustees Report.
The Academy said that to bring the trust fund into long-range actuarial balance, a period covering the next 75 years, the employee-employer payroll tax rate would need to be increased by 1.92% to 14.32%, from the current 12.40%. Further, long-range actuarial balance also could be achieved through an across-the-board benefit cut of 13% for all current and future recipients.
Revealed in the 2003 trustee’s report was a prediction that, by the year 2018, benefit payments to retirees will outpace tax income from those working. Though the 2003 report recalculated that year to be 2018, one year later than earlier predicted, it also says the deficit then will be larger than anticipated.
Thus 2028 marks the beginning of the end for Social Security. In 2028, benefits and administrative expenses begin to exceed tax income and interest on trust fund assets. To fill the gap, the Treasury must pay all interest in cash and begin drawing down the assets held by the trust funds, according to the group. Then i n 2042, the Social Security trust funds become exhausted – that is the funds will have used up all accumulated assets – and income will be insufficient to pay benefits in full.The Academy’s analysis also is on the Web site www.actuary.org .