A general alert sounds at the Social Security in the United States. According to the most recent report from the program's trustees, in a few years there will be a significant risk of not receiving pensions. Pensions would be at risk if there isn't a radical reform.
Until 2033, the program will be able to pay 100% of the pensions announced in the law. But once the fund is depleted, there will only be income from current taxes and contributions. That income will only be enough to pay about 77% of what's been promised.
More than 60 million retirees and their families, who depend on their pensions, could face a risk of not receiving the remaining 23% if there isn't an urgent reform. Many see this as a general alarm that demands a response from the Government.
Major alarm at the SSA in the United States: many will be left without pensions
If Congress doesn't act, in 2033 automatic payments will be reduced. They won't be canceled, but they'll be limited. In addition, the Medicare fund for hospitalization will also be depleted in 2033 and will pay only 89% of what's planned.
This will create insecurity for millions of people. Many Americans are worried and some are starting to retire earlier out of fear that pensions will be reduced if they wait too long.
What will happen if the money runs out
When the fund reaches zero, only income from taxes will keep coming in. That means that from then on, the system will only be able to pay up to 77% of the promised pensions. There are no reserves or margin for expenses or unforeseen events.
The response from the Government and Congress will be key. If measures aren't approved before 2033, the adjustment will be automatic, with no possibility of going back.
There are several possible solutions to avoid this crisis
One option is to increase taxes, for example by raising the contribution percentage or eliminating the income cap subject to taxes. This would bring more money to the system and help fund it for more years. Another option is to reduce benefits: raise the retirement age, reduce cost-of-living adjustments, or apply limits to people with high incomes.
It has also been proposed to combine the pension and disability funds (OASI and DI) into a single fund to extend solvency by one more year until 2034, with benefits at 81% in that combined scenario. Acting urgently allows changes to be spread out over time, which would be less harsh for the population and would allow for a smoother transition.