Social Security has been a hot button topic for political pundits for decades. Many younger Americans fear that by the time they get to retirement age, the program’s funds will be so depleted that they will receive little, if any, benefits. A recent announcement from the Social Security Administration (SSA) proves that these fears are well founded. At the current pace, the program will become depleted before today’s younger generation reaches 62.

This makes retirement planning more important than ever. With the retirement trust fund being steadily drawn down, today’s working people need to make their own independent provisions for their golden years. Many retirement-plan options are available for workers, including tax deductible 401 (K) plans and IRAs. Investment firms are growing more innovative in offering diverse options that go beyond stocks and bonds. These accounts now offer precious metals, real estate, and private equity investment options. Considering the SSA’s announcement, these expanded options could be a great thing for many planning for retirement.

The crux of the announcement

According to the SSA, the combined trust funds for the Old-Age and Survivors Insurance and Disability Insurance (OASDI) will, at the current pace, be depleted in the year 2034. Without action, which could take the form of raising taxes or cutting benefits, there will no longer be a reserve. At that point, benefit payouts could continue using the program’s current income. The SSA estimates that the income in 2034 will be sufficient to pay 79 percent of benefits.

Taking the OASI (Old-Age and Survivors Insurance) and DI (Disability Insurance) funds separately, the OASI trust fund’s depletion will occur in late 2034, with 77 percent of funds still payable, while the DI trust fund depletion will occur 2032, with 96 percent of funds still payable. Since last year, the overall depletion estimate for the OASDI remains the same. Taken separately, the OASI’s depletion timeline has moved forward slightly, while the DI depletion timeline has improved from 2028 to 2032.

Other insights

Despite the projected depletion of the trust funds, in 2017, the OASDI trust fund’s assets increased by $44 billion, to $2.89 trillion. The implications of this are unmistakable. The income of the programs at this point remains sufficient to continue paying benefits and building reserves. A clear change will likely occur before 2034 to reverse that trend and deplete the entire trust fund.

The SSA projects 2018 as the year this slow-wave financial tsunami will began. This year, the program’s cost will exceed income for the first time since 1982. The program will run in the red throughout the entire 75-year projection included in the report. It’s worth noting that the program has run a deficit of non-interest income since 2010.

The total 2017 income for the program was $997 billion. Of this, $874 billion came from payroll taxes, $38 billion from benefits taxation, and $85 billion from interest. Total SSA expenditures in 2017 were $952 billion. This includes $941 billion in benefits, plus the costs of administering the programs.

The number released in the report makes it clear that we have arrived at a critical point. More money will begin to flow out of the SSA than comes in. If the projections hold, serious problems will force a drastic change in policy by 2034. The SSA is encouraging Congress to take action now.

It seems commonsense that by taking action now, Congress can lessen the pain on workers and retirees in the future. Why suffer a sudden calamity down the road when we have time to prepare? Despite this, Congress has provided no clear guidance on what it plans to do to keep social security solvent.  Americans must not only be active in advocating for a solution, they must also be proactive in planning for their own retirements.