For the past several years, Social Security's Trustees have been reporting on the accelerating depletion of that program's Trust Fund. As recently as 2008, the Trust Fund's doomsday was projected to be as far away as 2041. But over the past several years that collapse date has inched forward and now sits at 2033.
Unfortunately, even that projection looks like it's a bit too optimistic. It turns out that there's a very real risk that next year's report will move that date even closer.
Since the Trustee's Report was written in April, some news has emerged about the investments in the Trust Fund putting a drag on the returns.
Every year, Social Security rolls over its maturing long-term Treasury bond holdings, picking up new ones to replace the ones that are expiring. Because of exceptionally low interest rates, Social Security is earning less interest on its new bonds than it did on its old ones.
That lower interest, along with the fact that the program now takes in less in taxes than it spends in benefits, means the Trust Fund is on even shakier footing.What's a Few Billion Among Friends?
Take a look at the scary trend line that shows the annual interest lost when the old long-term bonds matured or were sold versus the annual interest on the new long-term bonds:
Every year since 2010, the new long-term bonds being bought by Social Security pay substantially less interest than the old long-term bonds that are maturing. That red line is getting deeper, and the 2012 total is nearly $5.4 billion in annual interest foregone because the new bonds pay that much less than the old ones.
That amounts to $5.4 billion less available for paying benefits or for reinvestment. That's a $5.4 billion deeper hole the program faces next year than it would have if rates had stayed steady.
And that's just from one year.
Social Security Will Run Dry Even Sooner Than the Latest Bad Projection - DailyFinance