Scott Coulter, a former high ranking executive at the Social Security Administration, created a plan to save the funds from running out of money as soon as 2032. His plan was rejected, despite some clear merits.
According to The Wall Street Journal, Coulter “suggested investing a portion of the $2.7 trillion trust fund’s money in a Treasury note that would be convertible to S&P 500 equity at maturity.” This would allow Social Security to take advantage of the stock market instead of its investments in US debt.
New Social Security Commissioner Frank Bisignano rejected the idea, although it is not clear why. A new forecast is that Social Security will run out of money in 2032, which is earlier than previously forecast. The date has changed off and on.
As far back as 2010, Social Security projected that it would run out of money in 2035. It was not primarily due to an aging population but rather because women were having fewer children. Most data confirm this is true. Almost every previous analysis has placed the trouble date at 2035, give or take a year, depending on the impact of inflation on payouts.
The Office of Chief Actuary did an analysis this year titled “The 2025 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds.” The year before, the authors of the same report said that 81 million people will face a drop in payments. These include people who get retirement benefits, which they can start to take when they are 62 years old, as well as people with disabilities, which include people with blindness. Typically, individuals who qualify for disability benefits have been in the workforce for five to ten years.
Additionally, there is another group that can receive payments under certain circumstances. These are spouses of people who get Social Security and, in some cases, children of the recipients. This group can even include grandchildren.
One of the less often discussed effects of Social Security hitting a wall in 2032 is the change in poverty rates. According to the Urban Institute, “Our new projections show that allowing the trust fund to run out would increase the number of Social Security beneficiaries who live in poverty by more than 50 percent.”
How much do payouts fall in 2032? As Pew says, there is more than one “scenario.” These depend on how quickly the number of recipients grows and the number of people contributing to the fund. Pew puts the figure at 79% of current levels. That seems to be the consensus. However, other projections put the figure at 83% that year. There is a broad range of estimates about the level of payout declining more into the 2040s and 2050s if nothing is done to replenish the program.
What are the options to solve the problem? The first is that Congress adds money to the fund. The second is that people are faced with taking Social Security when they are older. They may have to start taking it at age 65 or even 72. Finally, people with high incomes could get less than others, and those with very high incomes get nothing at all. The last one is unpopular with the affluent because they paid into the fund, just as people who had lower incomes did.
In the final analysis, there is no consensus on how to handle the problem, and it is less than a decade away. The pitch for what might have been a solution was rejected quickly.
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