The Social Security doomsday clock is ticking on.
“If you’re running a prolonged deficit that becomes so unsustainable, then you have no choice but to cut those programs,” Fed Watch Advisors founder Ben Emons told Yahoo Finance Executive Editor Brian Sozzi on his Opening Bid podcast (see video above or listen here).
Added Emons, “There’s an estimation that Social Security could run out in terms of being able to fulfill its obligations to retirees because there’s just not enough money left.”
In 2013, an estimated 67 million people, or roughly one in five US residents, received Social Security. Earlier this year, recipients of the benefit received a cost of living adjustment (COLA) of just 3.2%.
Read more: How to find out your 2024 Social Security COLA increase
Some estimates show that Social Security will run out of money as soon as 2035 if the current trajectory continues, as costs rise and baby boomers retire. With lower birth rates and higher life expectancy, people over age 65 will outnumber people under age 18 by 2034, according to the US Census Bureau. As Social Security is funded by payroll taxes, a decreasing working population could hamstring its finances.
To keep Social Security solvent, the US will likely have to cut its spending or raise taxes — or both.
And it’s something not lost on the two candidates vying for the White House.
President Biden has proposed extending Social Security’s solvency by “asking the highest-income Americans to pay their fair share,” though few official details have been released. Trump, in his newly released GOP platform, said the party will ensure Social Security and Medicare’s solvency by “reversing harmful Democrat policies and unleashing a new Economic Boom,” with no specific proposals named.
Both Biden and Trump have rejected cutting benefits to shore up the program’s finances.
Whichever party wins the upcoming presidential election will have “a very difficult political choice that has to be made [regarding Social Security],” said Emons. “Today, even with higher rates, there’s a lot of interesting risk in the system.”
Three times each week, Yahoo Finance Executive Editor Brian Sozzi fields insight-filled, market-focused conversations and chats with the biggest names in business on Opening Bid. Find more episodes on our video hub. Watch on your preferred streaming service. Or listen and subscribe on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
In the below Opening Bid episode, Bradesco’s head of equity strategy Ben Laidler lays out his case why stocks may ignore a heated presidential election cycle.
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