Every year, the Social Security board of trustees releases a report with important details about the financial situation of this retirement benefits program. This year, Social Security's report card contained some good news for seniors -- but also some bad news.
The report should make seniors breathe a small sigh of relief, but they aren't out of the woods yet when it comes to their Social Security checks. Here's what you need to know.
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The bad news
Let's start with the bad news. Social Security is going to deplete its trust fund soon. By 2035, the combined trust fund for the Social Security retirement benefits program and the Social Security disability benefits program is going to have no money left in it.
That's a problem, because Social Security is only able to pay benefits from the trust fund and from revenue it's currently collecting from workers. It can't just print money or pull it from somewhere else. When the trust fund is gone, it will only be able to send out benefit checks it can cover with the money it's earning from payroll taxes coming in.
While this doesn't mean benefits are going to stop, the sad reality is that Social Security will only have enough to pay around 83% of the promised amount of benefits. Absorbing such a big reduction in benefits would be really hard for most seniors, many of whom don't have enough money in their 401(k) and other retirement plans to live without their full Social Security checks.
Since the date when this could happen is just a little over a decade away, many current retirees could be impacted if the trust fund runs dry. Of course, future retirees will suffer the financial consequences of these lower benefits, too.
The good news
There is some good news, though. The projected date when the funds will dry up is a year later in this trustee's report compared to last year's. Originally, the fund was expected to run out in 2034, so seniors could get a one-year reprieve, according to the latest data.
The fact that the deadline date for benefit cuts has been pushed back is a good thing, as it gives lawmakers more time to find a solution. It's unlikely that politicians will just sit back and let a big Social Security benefits cut happen because that would be very unpopular, to say the least. However, there's widespread disagreement about what to do to make the program more secure.
Retirees need to watch carefully for any pending legislation, and make their voices heard if necessary because the bad news outweighs the good here. Seniors simply can't absorb a big benefit cut and another solution must be found before the deadline.
