August 5, 2015 | by Chris Stein, CFP®, Finance Instructor at Colorado State University
2015 Social Security Trustees Report

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The 2015 OASDI Trustees Report, officially called “The 2015 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds,” was recently released and has a few interesting items that Social Security recipients should know.

  1. The latest estimate for the depletion of the OASI trust fund is 2034.  This is the trust fund holding previous years’ excess revenue from withholding taxes.  This trust fund was established to help absorb the burden on SS represented by the huge numbers of baby boomers who are starting to retire.  The SS system now takes in less revenue than it pays out so it is beginning to spend down this trust fund.  Once it is depleted the SS system will only be able to pay out what it receives each year in revenue.  Unless changes are made to the system this will result in a reduction in benefits of between 20 and 25%.  We are now within 20 years of this event.
  1. All signs point to no COLA adjustment for 2016. Unless there is significant inflation in the next couple of months, current SS recipients should plan to see no cost of living adjustment for 2016.  This is the same scenario as we saw in 2010 and 2011 when we also had no COLA adjustment.  The trustees point mainly to a reduction in energy (gasoline) prices, but as all seniors know, the expenses of a retired person are more heavily weighted in things like housing and medical expenses.  For this reason the CPI as used by SS may not accurately reflect your actual living expenses, so for many seniors a zero COLA means a slight reduction in living standard.
  1. Social Security Disability Insurance portion of the program is still the least solid. This part of SS is expected to run out of money next year unless an immediate fix is implemented.  In the past there have been transfers between the Retirement and Disability trust funds, and in all likelihood this will happen again.  The large numbers of baby boomers who have not yet reached retirement age but are not able to continue working due to a disability have really over- burdened this part of SS.  As these people age and move to the Retirement program, hopefully the Disability program will become more stable, but in the short term some fairly drastic actions will have to occur.
  1. In 2014 there were 166 million people who paid into the system and 59 million who received benefits. This means that for every person claiming there are about 2.81 people paying in.  This ratio is expected to continue to decline over the next several decades before bottoming out at about a 2:1 ratio.

For most people the most immediate issue will be the COLA announcement or if they are on disability they will be watching Congress closely to see what happens there.  Since most everyone is either a contributor or a claimant in the SS system it is wise to continue to monitor these developments.

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