Social Security COLA and Trust Fund Reserves UpdateSubmitted by Karstens Investments on October 31st, 2017
By Ryne Bessmer, AIF
Earlier this quarter, the Social Security Board of Trustees released its annual report on the long-term financial status of the Social Security Trust Funds. Just as the report showed last year, the combined asset reserves of the Trust Funds are projected to become depleted in 2034. The Trustees announced that the asset reserves of the Social Security Trust Funds increased by $35 billion in 2016 to a total of $2.85 trillion. The reserves are still growing and are expected to continue through 2021. However, beginning in 2022, the total annual outflows in payments to retirees are projected to exceed the inflows from current payers.
Last year, nearly 61 million Americans received Social Security benefits totaling $911 billion. At the same time, an estimated 171 million people paid into the Social Security system through payroll taxes on their earnings. If Congress does not act before then, the combined trust fund reserves are projected to become depleted in 2034. At that time, income for the program will be sufficient enough to pay just 77% of scheduled benefits.
This October, the 2018 cost-of-living adjustment (COLA) was announced to be 2%, which is the largest COLA since 2012 when benefits increased by 3.6%. This year’s increase was a paltry 0.3%, which followed no increase in benefits in 2016. COLAs are based on increases in the Consumer Price Index (CPI-W) which measures price inflation for urban workers. With an average retirement benefit of $1,360 per month in 2017, a 2% COLA would boost benefits by about $27 per month.
In her report to congress, Nancy Berryhill, acting Commissioner of Social Security, stated, “It is time for the public to engage in the important national conversation about how to keep Social Security strong. People understand the value of their earned Social Security benefits and the importance of keeping the program secure for the future.”
Sources: Social Security Press Release July 13, 2017