Virus could deplete trust fund earlier, report says

The Social Security trust fund could be depleted by 2030, fifive years earlier than the offifficial government estimate before the coronavirus hit, because of the recession and long- term-near- zero interest rates triggered by the pandemic.

What’s happening

The trust fund that pays retirement benefits would run out in a decade if the current economic downturn is as severe as the recession following the 2008 fifinancial crisis, the Bipartisan Policy Center said in a report issued Thursday.

“If policymakers fail to address Social Security’s financial imbalance soon, they will be left with only drastic solutions or financing a portion of promised retirement benefifits through general revenues,” according to the report. “Tax increases will be sharper, benefifit cuts will be more severe, and the cohorts of workers who bear these changes will have less time to plan their finances accordingly.”

What it means

Before the pandemic, the Social Security Administration had estimated the Social Security trust fund would be depleted by 2035. At that point, payroll taxes and other income would cover only about 79% of program costs, meaning that the government would need to raise taxes, cut benefifits or pull revenue from other sources.

Though payroll taxes ostensibly go to funds that build up assets fromwhich the benefifits are paid, the demographic challenge posed by the large, rapidly retiring baby- boomer generation means there’s not enough money for the government’s obligations.

Why it matters

The program created during the Great Depression is the largest single source of income for older Americans, providing the majority of income for half of retirees, and at least 90% of income for 18% of retirees, according to the Center on Budget and Policy Priorities, a progressive think tank.