Social securityIn last year's Trustees Report, the Social Security Administration warned that the program's trust fund was likely to run out of money in 2036, leading to deep cuts in benefits. If that weren't bad enough for anyone expecting to be alive then, a more recent projection from the Congressional Budget Office paints a much worse picture.

This year's CBO report forecasts that by the end of this decade, the combined Social Security Old Age and Disability Trust Funds will be about $800 billion smaller than last year's SSA projections. That's a very substantial drop -- and a sign that this year's Trustees Report will likely bring another downward revision to the year it expects those Trust Funds to dry up and benefits to be cut.

What a Difference a Year Makes

The table below shows that widening chasm between last year's SSA projections and this year's CBO projection:

Year

2011 Social Security Trustee's Report, Intermediate Projections (in billions)

2012 Congressional Budget Office Baseline Projections (in billions)

Difference (in billions)

2011

$2,678

$2,654

($24)

2012

$2,773

$2,709

($64)

2013

$2,874

$2,743

($131)

2014

$2,984

$2,762

($222)

2015

$3,096

$2,776

($320)

2016

$3,210

$2,791

($419)

2017

$3,322

$2,807

($515)

2018

$3,431

$2,818

($613)

2019

$3,526

$2,817

($709)

2020

$3,599

$2,802

($797)

Sources: Congressional Budget Office, Social Security Administration.


Sure, they're different agencies and may have different methods behind their projections. But last January's CBO numbers put the combined Trust Fund balances at $3,409 billion in 2020 -- much closer to what the SSA was projecting. That suggests that when the 2012 Trustees Report comes out, its own projections will probably be revised downward as well -- closer to the CBO numbers.

A downward revision wouldn't be anything new for the Social Security Administration. Check out the trend over the past five years:

Trustee Report Year

Estimated "Run Dry" Date

2011

2036

2010

2037

2009

2037

2008

2041

2007

2041

Source: Social Security Administration.


With several hundred billion in projected 2020 dollars vanishing in less than a year, it wouldn't be surprising to see the 2012 Trustees Report lopping another year or two off the projected run-out-of-cash date. And remember, when the Trust Fund runs out of cash, benefit payments are expected to fall, too.

Time is running out

If you're expecting to retire and are planning to rely significantly on Social Security, this is bad news indeed. Quite simply, it means time is becoming your enemy on both sides. On one side, you're a year closer to your anticipated retirement date. On the other side, the day you can no longer count on your full anticipated Social Security benefit keeps getting pulled closer, too. Put the two together, and the message gets crystal clear: Save more for your own retirement, or face a scary -- and rapidly approaching -- future.
Assume, for the sake of discussion, that Social Security's 2012 projection moves the Trust Fund expiration date closer by two years to 2034. That's still 22 years away -- enough time to do something about it, but approaching the point where it gets significantly tougher to catch up.

As of January 2012, the average Social Security check for a retired worker was around $1,229 per month. When the Trust Fund is gone, that amount is expected to fall by about a quarter. That works out to a shortfall of around $307.25 per month. Using what's known as the 4% rule, covering that gap from your own investments will require $92,175 in additional savings. The table below shows how much you'd need to save each month to reach that number, depending on how many years head start you get and what rate of return you achieve:

Years to Go

10% Annual Return

8% Annual Return

6% Annual Return

4% Annual Return

2% Annual Return

24

$77.48

$106.36

$143.77

$191.13

$249.62

22

$96.70

$128.59

$168.75

$218.31

$278.24

20

$121.38

$156.49

$199.50

$251.31

$312.67

15

$222.39

$266.37

$316.95

$374.56

$439.53

10

$449.97

$503.84

$562.46

$625.98

$694.51

5

$1,190.32

$1,254.48

$1,321.13

$1,390.29

$1,462.00

Source: Author's calculations.


The bottom line is simple: Social Security's Trust Fund is on borrowed time. You still have the opportunity to save enough to make up for what you'll be missing when it's gone, but you need to get started on it now, or it'll soon become an impossibly high hurdle to clear.

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Michael

The politicians are telling us that Social Security is failing. If it is, it's because those stinking thieves cant keep their sticky fingers off of it. All of us who have worked all of our lives only to have those bastards tell us that there isn't enough money need to explain why. You can bet if their retirement was tied to it they would find enough money somewhere. It's pretty damn sorry for these sob's to get cushy retirement with all medical expenses paid and then tell us "Oops, there isn't enough for you!''.

March 21 2012 at 5:09 PM Report abuse +1 rate up rate down Reply
bobtrain

Another article devoted to killing Social Security and telling us to put our money in the hands of the money lenders. If the government paid a decent interest rate on the money borrowed from SS, there would be no problem. Who do you trust, the bankers or the government?

March 04 2012 at 12:47 PM Report abuse rate up rate down Reply
2 replies to bobtrain's comment
Jessica Mendoza

Look at the bigger picture. The bankers belong to the govt. You should trust your money with yourself and invest wisely. Invest in gold! It's better at conducting electricity than copper is. They use it a lot in mobile phones, laptops, tablets and computers. Technology doesn't seem to be going away. If money wasn't tied to the Federal Reserve and instead tied to gold then we would be the richest nation in the world again.

March 05 2012 at 3:18 PM Report abuse rate up rate down Reply
Jessica Mendoza

Look at the bigger picture. The bankers belong to the govt. You should trust your money with yourself and invest wisely. Invest in gold! It's better at conducting electricity than copper is. They use it a lot in mobile phones, laptops, tablets and computers. Technology doesn't seem to be going away. If money wasn't tied to the Federal Reserve and instead tied to gold then we would be the richest nation in the world again.

March 05 2012 at 3:19 PM Report abuse rate up rate down Reply
bobtrain

Another article devoted to killing Social Security and telling us to put our money in the hands of the money lenders. If the government paid a decent interest rate on the money borrowed from SS, there would be no problem. Who do you trust, the bankers or the government?

March 04 2012 at 7:34 AM Report abuse rate up rate down Reply
1 reply to bobtrain's comment
Jessica Mendoza

Look at the bigger picture. The bankers belong to the govt. You should trust your money with yourself and invest wisely. Invest in gold! It's better at conducting electricity than copper is. They use it a lot in mobile phones, laptops, tablets and computers. Technology doesn't seem to be going away. If money wasn't tied to the Federal Reserve and instead tied to gold then we would be the richest nation in the world again.

March 05 2012 at 3:19 PM Report abuse rate up rate down Reply
Harry wimpling

If the government will stop the insane continuance of doling out unemployment payments,we night be able to save social security.As long as people don'y have to work there will be less money paid into the ss fund.Some folks have been on unemployment for several years.

March 01 2012 at 4:39 PM Report abuse rate up rate down Reply
Joe

There is no cash in the trust fund. It has all been borrowed by the federal government for current spending. So the projection that the truxt fund won't run out of money until 2035 or so is an illusion. SS already paid out more than it took in last year forcing the truct fund to "Cash in " some of the IOU's from the regular budget. When we are already spending 1.2 Trillion more than we receive the shortfall in SS just adds to the already enormous federal debt.. Not to mention that the "Payroll tax cut" also reduced SS funding by 160 billion or so making the situation even worse. so basically I agree with Retsubcpo comment below.

March 01 2012 at 9:30 AM Report abuse rate up rate down Reply
1 reply to Joe's comment
charlie4562r

Brilliantly Explained...
A few days ago I heard Dave Ramsey use this analogy on his radio program.
This rather brilliantly cuts thru all the political doublespeak we get. It puts it into a much better perspective.
Lesson # 1:
* U.S. Tax revenue: $2,170,000,000,000
* Fed budget: $3,820,000,000,000
* New debt: $ 1,650,000,000,000
* National debt: $14,271,000,000,000
* Recent budget cuts: $ 38,500,000,000
Let's now remove 8 zeros and pretend it's a household budget:
* Annual family income: $21,700
* Money the family spent: $38,200
* New debt on the credit card: $16,500
* Outstanding balance on the credit card: $142,710
* Total budget cuts: $385
Got It ?????
OK now Lesson # 2: Here's another way to look at the Debt Ceiling:
Let's say, You come home from work and find there has been a sewer backup in your neighborhood....and your home has sewage all the way up to your ceilings.
What do you think you should do ......
Raise the ceilings, or pump out the crap?

Your choice is coming Nov. 2012

March 03 2012 at 3:58 AM Report abuse rate up rate down Reply
Joe

There is no cash in the trust fund. It has all been borrowed by the federal government for current spending. So the projection that the truxt fund won't run out of money until 2035 or so is an illusion. SS already paid out more than it took in last year forcing the truct fund to "Cash in " some of the IOU's from the regular budget. When we are already spending 1.2 Trillion more than we receive the shortfall in SS just adds to the already enormous federal debt.. Not to mention that the "Payroll tax cut" also reduced SS funding by 160 billion or so making the situation even worse. so basically I agree with Retsubcpo comment below.

March 01 2012 at 8:58 AM Report abuse rate up rate down Reply
BuckeyeCentral

Yep- so the Brainiacs in Washington (Obama & Congress)-- have cut the funding to social security by over 30% the past year-- and have now extended it through 2012. The "Payroll Tax Cut" is simply a reduction in the Social Security system's funding mechanism. If there was ever a case of kicking the can down the road-- and jeopardizing this program-- it is this move by the Obama administration.

Where is that outrage?

March 01 2012 at 8:46 AM Report abuse +1 rate up rate down Reply
Joe

There is no cash in the trust fund. It has all been borrowed by the federal government for current spending. So the projection that the truxt fund won't run out of money until 2035 or so is an illusion. SS already paid out more than it took in last year forcing the truct fund to "Cash in " some of the IOU's from the regular budget. When we are already spending 1.2 Trillion more than we receive the shortfall in SS just adds to the already enormous federal debt.. Not to mention that the "Payroll tax cut" also reduced SS funding by 160 billion or so making the situation even worse. so basically I agree with Retsubcpo comment below.

March 01 2012 at 8:03 AM Report abuse rate up rate down Reply
1 reply to Joe's comment
bobtrain

The government is, by the legislation creating the payroll tax cut, required to put money from income and other taxes into Social Security to make up for what you didn't pay.

March 04 2012 at 7:40 AM Report abuse rate up rate down Reply
josephbvrlyhlls

If 14,000,000 people go back to work there wiil be no problems with Social Security. Force your politicians to stop job out sourcing and stop the greed of the owners and the controllers of mulrinational corporation and oil companies.

February 22 2012 at 10:25 AM Report abuse rate up rate down Reply
ha6ai

Repeal Obamacare immediately.

February 21 2012 at 2:38 AM Report abuse +1 rate up rate down Reply