How Coronavirus Could Damage Social Security
What you need to know about potential impacts on program's future
By Brittany De Lea
Social Security – a very popular program relied on by nearly 70 million Americans – could be yet another victim of the coronavirus pandemic, which has wrought havoc on the U.S. economy.
As previously reported by FOX Business, funding for Social Security was on shaky ground even before the coronavirus pandemic began.
According to the annual Social Security and Medicare trustees' report released this week, reserves for the program – which covers the old age and disability insurance – will be depleted in 2035. At that time, continuing tax income will be sufficient to cover 79 percent of scheduled benefits.
However, those projections may deteriorate as a result of the pandemic.
Since many businesses around the country have been forced to close – and millions of Americans have lost their jobs – payroll tax revenue has declined. Unemployment benefits are not subject to payroll taxes, which fund Social Security and Medicare.
Employers and employees each pay 6.2 percent for Social Security and 1.45 percent for Medicare, and an additional 0.9 percent is levied on the highest earners.
Officials told reporters this week that even if employment rebounds by the end of the year, depletion of the funds would likely accelerate due to the economic shutdown, as reported by The Associated Press.
“With 26 million Americans filing jobless claims in just the last five weeks, it is easy to see that for this year, payroll tax receipts will be most likely much lower than in years past,” Matt Canine, a senior wealth adviser at financial planning firm East Paces Group, told FOX Business. “If we assume that the pandemic’s economic effects throw us in the high cost (negative) category, the trust funds could be depleted by 2031 in [the trustees’] estimation.”
Canine noted that an accelerated timetable for depletion of the program’s funding doesn’t mean people won’t receive benefits – they just won’t receive benefits in full.
In response to those concerns, Treasury Secretary Steven Mnuchin said the Trump administration is aiming to mitigate any long-term damage.
Since making changes to Social Security is always a hot button political issue, Canine doesn’t believe any action will be taken to modify the program in the near future. Instead, lawmakers will likely wait to see how the pandemic affects next year’s trustees report, which will account for the effects of COVID.
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