Social Security Disability: What Happens When It Runs Out of Money?

Social Security's disability program is in worse financial shape than the retirement side.

Jul 6, 2014 at 7:15AM

Social Security helps not only retirees but also roughly 9 million of people suffering from disabilities. Unfortunately, the trust fund that covers disability payments is in even worse financial condition than the trust fund that covers retirement benefits. What will happen when the disability program's trust fund runs out?

Ss Disability
Source: Social Security Administration.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, talks about the two Social Security trust funds, noting that the latest estimates give the retirement trust fund about 20 more years before it runs out of money, but the disability trust fund is slated to be used up by 2016, just two years from now. Dan notes that if it does run out of money, recipients will only get about 80% of their scheduled benefits, with cuts happening automatically. Dan points out that one simple fix would be to have more Social Security payroll taxes allocated toward disability, but that would only leave the retirement trust fund in worse shape and not provide a long-term fix. Dan concludes that what happens with disability could provide answers on what politicians will do with the retirement side of Social Security decades from now.

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Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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