A recent study by the Congressional Research Service (CRS) opines when Social Security is expected to run out of money, and potential scenarios regarding future Social Security benefit funding.
2033 is the big year – the first year of projected insolvency, when it is expected that the program will have enough dough to pay only about 77% of the required benefit payments.
And if the government fails to pay the benefits required by law, says CRS, beneficiaries could take legal action. Insolvency would not relieve the government of its obligation to pay.
If Congress waits until insolvency takes place, it will just have to cut benefit payments by about 23% as noted above. Or, they could eliminate annual deficits by raising the Social Security payroll tax rate from 12.4% to 16.1% in 2033, gradually increasing it to 17% thereafter – the more likely scenario in our view. But if Congress acted right now, the benefit cuts and/or tax increases necessary to restore solvency until 2087 would be about half as large as those needed if Congress just punts – once again.