For better Social Security is America’s most important program with regard to providing a financial foundation for seniors. Each month, nearly 45 million senior citizens receive a Social Security benefit.
The Social Security Trustees recently released their annual report about the current state of Social Security, as well as short- and long-term projections for the program. And the report starts off with some good news: Social Security ran a surplus of more than $44 billion in 2017
Unfortunately, there isn’t much to smile about beyond that. In fact, the report confirmed last year’s finding that Social Security is on a path to insolvency. Here’s a rundown about Social Security’s 2017 performance, and why things are expected to go downhill quickly.
In 2017, the payroll tax generated $873.6 billion of the $996.6 billion collected. On a percentage basis, that’s 87.7% of all revenue collected in 2017, up slightly from the 87.3% of the $957.5 billion collected in 2016.
$128,400 in 2018 will escape Social Security’s payroll tax on any income above this level, while more than 90% of working Americans pay into Social Security on every dollar they earn.
It’s also worth pointing out that Social Security’s 12.4% payroll tax isn’t entirely applicable to most people. If you’re employed by someone else, your employer covers half your liability (6.2%), with you responsible for the other half (6.2%). Only folks who are self-employed are responsible for the full 12.4% payroll tax.
With a significant surplus in 2017, and such a massive stockpile of reserves, it may seem like Social Security is doing just fine. And for the moment, it is.
However, the bad news is that the 2017 surplus is projected to be the last one for the foreseeable future — and the projections look 75 years into the future. In 2018, Social Security is expected to run a deficit of approximately $2 billion, and while this may seem rather mild, the deficits are expected to widen significantly over the next couple of decades.
The third and final revenue source is the interest income earned by Social Security’s asset reserves. In 2017, the program generated $85.1 billion in revenue, or 8.5% of total revenue.