Trust Fund Woes

Vawter Financial |

The changes in Social Security benefits and taxes for 2021 were a bit controversial.  Benefits will rise 1.3% this year, which is not expected to allow beneficiaries to keep up with increases in the cost of living.  Meanwhile, the tax withholdings have risen faster than inflation; for 2021, workers will pay a 6.2% Social Security tax and a 1.45% additional Medicare tax on the first $142,800 they earn—up from $137,700 last year. 

We can expect more of the same (lower-than-inflation benefits and higher taxes) in coming years, as the Social Security trust fund is on course for insolvency in the year 2031 unless Congress takes action.   

Interestingly, the Social Security trust fund is actually the most solvent of all the major trust funds administered by the U.S. government.  According to the Committee for a Responsible Federal Budget, the Highway Trust Fund, which pays for upkeep of the interstate highway system, will be depleted sometime this year, while the Pension Benefit Guaranty Corporation, which backstops single-employer and multi-employer pension plans, will run out of money in the mid-2020s without intervention.  Medicare Part A is projected to reach insolvency by 2024. 

The upshot.  Not only will FICA taxes go up before long, but also gasoline taxes and PBGC contributions from pension plans. 



The opinions expressed in our blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this blog is no guarantee of future results. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.