New Forecast Predicts Later Social Security Depletion

Social Security’s trust funds may not expire as soon as anticipated under a new projection released by an Ivy League college’s business school.

In a projection released by the Penn Wharton Budget Model on June 11, the Old-Age and Survivors Insurance (OASI) trust fund could be depleted by February 2033, months later than what the trustees had forecast in a report released earlier this month.

The Social Security trustees’ report released on June 9 predicted that the Social Security trust fund would last until the fourth quarter of 2032, spanning October, November, and December. The depletion dates forecast by both the trustee report and Penn Wharton’s analysis assume that Congress would take no action before those dates, respectively.

If the trust fund runs dry, it doesn’t mean that Social Security payments to retired Americans would stop. However, it means the program would be propped up only by federal payroll taxes and that Social Security payments would be reduced.

Penn Wharton’s analysis predicted that around only 86 percent of benefits would be payable when the fund depletes, falling to around 60 percent by the year 2100. The trustees said that around 83 percent would be payable when the funds dry up, dropping to 65 percent by 2100.

“Agreement on the bottom line indicates that Social Security’s financing shortfall is robust to two very different modeling approaches,” the analysis from Penn Wharton said. “At the same time, differences in the underlying demographic and economic paths reveal where the projections could diverge in the future.”

Both Penn Wharton and the trustees projected lower long-term fertility rates, with Penn predicting 1.6 births per woman in the United States when compared to the trustees’ projected 1.75 births per woman.

“Lower fertility affects Social Security’s finances with a generation-long lag,” the university said in its report. “Children born over the next two decades enter the workforce starting in the 2040s, so [the business school’s] lower fertility path translates into a smaller taxpaying workforce, a higher old-age dependency ratio, and a higher cost rate in the second half of the century.”

The Penn Wharton analysis also made note of greater use of GLP-1 receptor agonist drugs such as Ozempic or Wegovy that can trigger a loss of appetite and that weight loss could lead to longer life expectancies and may lead the school to “increase its projected longevity gains in the future.”

The analysis did not make mention of possible shortfalls in immigration, while the trustee report said that “assumed levels of temporary or unlawfully present immigrants entering the country in 2022–25 were lowered,” which would lead to an earlier than expected depletion of the fund.

Separately, a report from the Washington-based Committee for a Responsible Budget said that retirees in some states could see an average drop of $500 in their Social Security payments if the fund goes dry in 2032. The analysis was issued several days before the trustee delivered its yearly report.

An average monthly benefit cut could “surpass $500 in 29 states, with the largest cuts impacting retirees in Connecticut, Delaware, Maryland, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, Utah, and Washington,” the think tank stated.

In a statement released earlier in June, SSA Commissioner Frank Bisignano called on members of Congress to act on passing a measure to deal with the potential depletion of both the OASI and the related disability insurance trust funds.

Lawmakers and the SSA must “work together to ensure the trust funds continue to provide financial stability now and for future generations,” he said in the statement.