Retirement Trust Fund Depletion: Social Security benefits may shrink by 2033. Here's why, how it may affect you, what can be done to avert crisis and how to prepare for future

Time of India

5 days ago

A recent government report has raised concerns about the future of Social Security. The
Social Security
Board of Trustees now says the
retirement trust fund
could be depleted by 2033. This is one year earlier than its last estimate. Millions of Americans who rely on these benefits may see reduced payments if no action is taken, media reports said.
Trust Fund Depletion Expected in 2033
The Social Security Board of Trustees released its 2024 annual report. It shows that the retirement trust fund may run out by 2033. This change was shared with the Centers for Medicare & Medicaid Services. The new timeline increases concerns for future retirees.
If Congress does not take steps soon, benefits could be reduced. A 23% cut may occur. This would affect many Americans who depend on the system.
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How It May Affect You?
The Old-Age and Survivors Insurance (OASI) Trust Fund is at risk. This fund gives monthly checks to retired workers and their families. If the fund runs dry, payroll taxes will only cover about 77% of scheduled payments. This would mean smaller checks for millions of retirees.
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Many people use these payments as their only income. A cut in benefits could create serious challenges for these households.
Why is it Happening?
Several issues have caused the trust fund to weaken faster. One factor is the Social Security Fairness Act. This law helped nearly 3 million retired public workers by improving their benefits. However, it also added pressure to the trust fund.
Demographic changes are also a factor. More people are retiring as baby boomers age. People are living longer and having fewer children. This means fewer workers are paying into the system while more people collect benefits for longer.
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What Can be Done to Avert Crisis?
Lawmakers have suggested different ways to strengthen the fund. One idea is to raise the
Full Retirement Age
. It is now 67, but some propose increasing it to 70. Early retirement age could also move from 62 to 65.
Another idea is to raise the cap on income subject to Social Security taxes. At present, only income up to $176,000 is taxed. Increasing this limit could mean higher contributions from high earners.
How to Prepare for Future?
Financial experts believe millennials and Gen Z may not receive full benefits. Some may receive only partial benefits or none at all. These groups are advised to start preparing now.
Retirement planning
experts recommend early saving. Starting a Roth IRA or increasing contributions to a 401(k) are good options. These actions help build personal savings to rely on later in life.
FAQs
What happens if the Social Security trust fund runs out in 2033?
If the fund runs out, only 77% of scheduled benefits will be paid. Retirees may face a 23% cut unless Congress takes action to fix the issue.
How can younger people prepare for reduced Social Security benefits?
Younger workers should save more through Roth IRAs or 401(k)s. Financial planners suggest preparing for retirement without depending on full Social Security payments.