Federal Reserve Officials Report That Social Security Disability Funds Are Perilously Low
Could 2016 be the year that Social Security’s disability funding runs out? According to recent reports from the New York Times and Chicago Tribune, government officials have stated that 11 million Americans could be left to fend for themselves by 2016 if the Social Security’s disability fund isn’t replenished.
Obama Administration officials reportedly “expressed concern,” according to the NYT, after issuing the annual financial report on Medicare and Social Security.
Together, the programs account for nearly 40% of all federal spending, and the report shows that the current disability funding will be depleted by the fourth quarter of 2016 if no additional funding can be provided. If this happens, the officials stated, then all Social Security benefits would be cut by 19% because payroll taxes — which cover the funds — would only be able to cover 81% of the needed payments.
Currently, the Chicago Tribune reports, the average monthly Social Security funding provided to disabled workers and their families is $1,017. A household with this amount would see a cut of $193 per month if the fund does indeed run out next year.
Furthermore, the Tribune reported, there will be no cost-of-living increase at the end of this year, making it the third year since 1975 that the rising cost of living hasn’t been factored into an automatic payment raise for Social Security beneficiaries.
It’s possible that this problem will be fixed before the funding runs out, but only if Congress agrees to act quickly. Republicans have been advocating for aggressive changes in order to save the Social Security disability trust fund, but lawmakers have yet to reach an agreement about where the funding could come from.
While there is time for lawmakers to search for a reasonable solution, the report is worrying for many Americans because there isn’t time to ignore the fact that Baby Boomers are aging, many who were hoping to retire in their 50s are now in their 60s, and this entire generation isn’t too confident in its ability to manage a comfortable post-retirement lifestyle.
The issue of a “comfortable lifestyle” isn’t just a matter of paying for that house on the beach in Florida; the problem that many Boomers are facing now is that many planned their retirement funds before the Recession hit, and now those retirement plans and Social Security benefits are no longer guaranteed.
In fact, according to Forbes, only 62% of Baby Boomers have a financial plan detailing what they’ll need during retirement, and only 59% say they have a plan for withdrawing their savings during retirement.
Many Baby Boomers, for instance, lost their retirement plans when the economy crumbled and they scrambled to find alternative plans, such as annuity payments; others simply accepted the loss and are still living without a retirement plan.