Although Americans have been hearing of the potential crisis surrounding Social Security benefits for years, changes that could be detrimental to the survival of the program could be closer than many think. According to the Social Security Administration, the program, formally known as OASDI, is in serious trouble. If changes are not made soon, the disability insurance portion of Social Security could be depleted as early as the last quarter of 2016, and the retirement portion could be insolvent as early as 2034.
When most Americans think of Social Security, they think of retirees and survivors, which account for approximately 48.1 million of the program’s beneficiaries. It is the smaller portion of the program, the disability portion, however, that is in the most severe position. With approximately 11 million Americans receiving an estimated $145.1 million in disability benefits in 2014 alone, and only $114.9 million in income for the DI portion that year and reserves of only $60.2 million at the end of 2014, it doesn’t take a rocket scientist to figure out that the program cannot continue without change. Unfortunately, there is no easy answer.
If no additional funding can be obtained for the Disability Insurance portion of the program, recipients will see a steep decrease in their benefits- a whopping 19 percent each month. As it stands, disabled individuals and their families receive an average of $12,228 annually. Such drastic cuts could leave these already struggling Americans with less than $10,000 in annual income from the program.
What’s Being Done?
With the race for presidential nominations for 2016 already in progress, many candidates are offering proposals that are designed to help increase the longevity of the Social Security program. While many candidates have proposed dipping into the funds from the Old Age and Survivors (OAS) portion of the program, which currently receives 85 percent of the money, doing so is like placing a temporary band-aid on a permanent wound, and would cause financial shortfalls in both programs by 2034.
Other options proposed by candidates include gradually raising the retirement age, cutting recipients’ benefits across the board, raising Social Security contributions for higher income individuals, and phasing out benefits for those earning more than $200,000 per year. While it’s true that lawmakers need to resolve the crisis in the least disruptive way, Americans will also need to prepare for the upcoming changes.