Social Security is in financial trouble. Thanks to demographic shifts, more workers are retiring than ever before, and that's putting a strain on the program. Even though Social Security anticipated this crisis by putting in place mechanisms to build financial reserves in Social Security Trust Funds, that money won't be enough by itself to save the program from a significant disruption in the not-too-distant future.

The latest Social Security trustees report [opens PDF] gave the latest reading on the financial condition of the program. Social Security's prospects still look dire, and both retirees and current workers need to keep their eyes on a few key milestones that are coming faster than many would think.

One Social Security card mixed in with many $20, $50, and $100 bills.

Image source: Getty Images.

2018: Drawing down trust fund assets

Social Security has been building up its balance of trust fund reserves for decades, as the amount of worker contributions toward the program has dramatically exceeded the draw on those funds from retirees and other Social Security recipients. In 2017, payroll taxes contributed more than $700 billion toward covering the costs of Social Security's old age and survivor insurance program, which amounted to more than $800 billion. Income taxes on benefits and interest on the trust fund balances were enough to make up the difference, and still left a $19 billion increase in reserves.

However, predictions now indicate that the old age trust fund balance will shrink by $25.4 billion using intermediate cost projections. Payroll taxes will be relatively stagnant, while interest and income tax revenues will decline from year-ago levels. Meanwhile, benefit costs will climb by nearly $47 billion. Part of the issue is that some money will get diverted this year to the disability insurance trust fund, but even when you consider the rise in the balance of that fund, the net still is negative for this year.

Currently, experts hope that Social Security will come close to breaking even in 2019. However, by 2020, declines in the overall trust fund balance should begin to accelerate anew, beginning a downward spiral that will eventually lead to the depletion of the trust funds.

2019: Hitting the $1 trillion mark in total benefits

Social Security has grown dramatically over the years, and the combination of a jump in retirements and longer lifespans has put strain on the program. In just four years from 2013 to 2017, benefits jumped by almost $130 billion, coming in above $940 billion in 2017. This year, benefits will fall just short of the $1 trillion level, with current expectations for $1.05 trillion in benefit payments in 2019.

Most of those benefits -- just over $900 billion -- will go toward funding old age and survivor payments. The remaining $150 billion will go toward disability payments. Over the ensuing years, total payouts should eclipse $1.5 billion by 2025, and those growth rates will be too large for revenues to keep up.

2034: Reaching zero

By 2034, years of spending more on benefits than the program takes in from its revenue sources will force Social Security to completely deplete its trust fund reserves. From there on out, Social Security will have to rely solely on payroll tax revenue, income taxes on benefits, and any other funding mechanism that might be in place by then to supplement the program's needs.

Social Security projects that starting in 2034, the program will be able to pay only 79% of its joint obligations to retirees and disabled workers and their families. Old age and survivors benefit recipients will have only 77% of their benefits covered, while disability would be able to pay 96% of scheduled benefits. That gives lawmakers about 16 years to figure out how to avoid what for many would be a cataclysmic decline in what they get from Social Security.

What's next?

As we've seen in past years, these estimates are always subject to change. Yet it's clear that the problems with Social Security aren't going to go away by themselves. Without the attention these issues deserve, Social Security will remain under threat in the years to come.

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