There is good news and bad news about the Social Security retirement trust fund. The bad news is that if nothing is done, then the trust fund will run out of reserves and benefits would have to be drastically cut. There is further bad news in that politicians are deeply divided over what to do to fix the problem.
The good news, however, is that the reserves are not expected to run out until 2034. That means that there is still plenty of time to come up with a solution. But, what is the cause of this problem?
Fox Business explains it in "This Scary Social Security Trend Can't Be Ignored Any Longer." There are three reasons why the trust fund is running out of reserves:
The first cause of the problem is that the baby boomer generation is retiring at a faster rate than younger generations are going into the workforce. That means payroll taxes will not be enough to cover current benefits.
Another problem is that Americans are living longer generally. Thus, the lifetime benefit amount the average person receives is greater. In most contexts people living longer is good, but in the context where that means they receive more money from Social Security it is bad for the health of the trust fund.
Finally, a lack of education about how Social Security works could also be hurting the system. If people retire as soon as they are eligible, they might receive lesser benefits, but they also are not paying into the system anymore. That can cause some serious problems.
Reference: Fox Business (May 1, 2016) "This Scary Social Security Trend Can't Be Ignored Any Longer."