Anxiety over the future of Social Security largely centers on the impending insolvency of the Old Age and Survivors Insurance (OASI) Trust Fund, which is expected to run out of money within the next decade. When that happens, Social Security will be solely dependent on payroll taxes that currently fund only 77% of benefits. But the program also has several threats that could impact it long before then.
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The Social Security Administration has been hit by a variety of problems in recent years, ranging from an overpayment scandal to threats of benefit cuts from certain lawmakers. These problems could spell bad news for Americans who have paid taxes into the program. Here are four reasons Social Security could fail those taxpayers in the next five years.
Overpayments
As of late last year, the SSA had distributed more than $23 billion in overpayments — and the agency has been busy contacting recipients to pay it back. The situation landed Social Security officials in front of Congress and caused widespread confusion and anger over why it happened and how the SSA handled things. The bottom line for taxpayers is that some will have to immediately repay thousands of dollars in overpayments, even if they were not at fault. In addition, taxpayers will have to foot the bill to fix the problem and prevent it from happening in the future.
Staff Shortages
Last year, the country’s biggest federal employee union warned that the SSA is an agency in “crisis” due to underfunding and staff shortages that could lead to even worse delays in getting benefits to millions of recipients. As GOBankingRates previously reported, staffing levels at the SSA are at a 25-year low even as the number of beneficiaries continues to grow. In fact, the number of beneficiaries was expected to increase 25% in 2023 alone. This has already led to long wait times for beneficiaries (and taxpayers) seeking customer service help at the SSA.
Retiring Boomers
One reason the SSA was able to build up the OASI fund in the first place was because so many baby boomers paid into the system when they were working. But now many, if not most, boomers have retired and started collecting Social Security. This not only means the program is missing out on the taxes boomers pay into it — it must also start paying their benefits.
As the Washington Post reported, as boomers retire, they’ll push the worker-to-retiree ratio “lower than ever,” which poses a major threat to Social Security. For now, younger demographics such as Gen X and millennials make up a smaller share of the population than boomers did at the same age. This gap and other issues have led some lawmakers to propose cutting Social Security benefits sooner rather than later.
Immigrants Could Help Fill in the Gap, But….
More immigrants can play a major role in filling out the ranks of working-age Americans, according to the Washington Post. Immigrants are younger than U.S.-born workers on average and are already the main contributor to the country’s population growth. But many lawmakers support measures to decrease rather than increase immigration, which means Social Security is missing a vital near-term source of revenue.
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This article originally appeared on GOBankingRates.com: 4 Reasons Social Security Could Fail Tax-Paying Americans in the Next 5 Years