Social Security is a significant program for about 64 million people in the United States where nearly 90 percent of the patients aged 65 and above are beneficiaries. Besides, the program has serious challenges in its funding capabilities. In the coming years, the outlays of the Social Security benefits program are expected to exceed its revenues. This is mostly due to increasing numbers of retirees who are enforcing payroll taxes that fund the program.
Worries over funding social security
There are peripheral worries as to how Social Security is financed. Avram Sacks, a lawyer and former SSA employee, has talked about the overpayment scandals in the agency. Overpayments, which occur when people are entitled to less benefits but receive more due to innocent mistakes or active corruption, incidences of these overpayments have been increasing according to Sacks since his advent into SSA in 1987. In an interview, he said that he made the observation that the overpayment assessment system was irregular and that he sued for the purpose of correcting it in the federal courts.
This problem has persisted over time. According to a report from the agency’s Office of the Inspector General, the SSA paid out almost $72 billion, most of it in overpayments, between 2015 and 2022. While the SSA has the power to reclaim those amounts, it is not always successful. As of this writing, the agency had more than $23 million in outstanding overpayments as of the close of the 2023 fiscal year.
Looking ahead, Social Security is going to face an even bigger issue than the one depicted in the analysis. Once a year, the Social Security Trustees provide a report on the overall status of the program. In the current report, they suggested that there is a possibility that by the year 2035, the combined trust fund of the program may be depleted. If so, benefits would be slashed by roughly 25 percent, a drop that would be heartbreaking for countless retirees who rely so much on these monthly checks. For several seniors, Social Security constitutes a large component of their earnings. Among the beneficiaries aged 65 years and older, about 12% of men and 15% of women depend on it for more than ninety percent of their income. Worse, over forty percent of women and over thirty-five percent of men within this age cohort rely on Social Security for at least fifty percent of their income.
Challenging future
Many current retirees already face a challenging financial landscape. The amount of savings of Americans between ages 65 and 74 was only $200,000, as of 2022, which means a monthly retirement income of about $8,000 on the 4% withdrawal rule. To avoid a deterioration of the situation, the SSA must prevent overpayments from occurring. In the past, the Office of Inspector General has suggested measures to mitigate the occurrence of improper payments by monitoring their risk and taking steps to resolve them afterwards. Even though changes have been minimal, the SSA has taken action to reassess its policy on overpayments and is in the process of limiting overpayments to working beneficiaries.
Eliminating overpayment will not bring all the resolution required of Social Security in future, however, it is a step in the right direction that will prevent or lessen the magnitude of future benefit cuts.
