October 26, 2009
Social Security outlook
For the first time in 25 years, the Social Security system has had to dip into its reserve funds in order to make payments to recipients. Is this the start of a worrisome trend? Is Social Security now in trouble?
Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:
"It's not in trouble immediately. The fact that it had to dip into its reserve fund I think is totally due to the recession. With the recession, we have fewer people working, so contributions are down. I think those contributions will pick up when the recession's over, so I think this is probably at most a two-year problem. But, that said, Social Security certainly has a longer run problem. In fact, every year the trustees of the Social Security system report on its financial health. Right now, they are telling us that the deficits that we just saw this year and probably next year will actually become permanent beginning in 2016. That is, to make payments, Social Security will have to dip into its over $2 trillion fund. And that $2 trillion reserve fund will be depleted by 2037. So in essence, Social Security will go bust by 2037. After that, the contributions into the system, the trustees estimate, will only be able to cover three-fourths of promised benefits. So, yes, we had a little run on Social Security now, but I don't think it's a major problem. But we do have a problem looming, so better now than ever to look at Social Security to see what can be done to shore up the system."
Posted by Dave at October 26, 2009 08:00 AM