Gary Shilling: The Social Security’s Funding Crisis Has Arrived

Comment by tonytran2015: Can most pension funds last?, posted on December 10, 2016, Reading a sovereign budget, posted on 2020 July 3rd.

…Here’s the troubling part: “The projections and analyses in this year’s
report do not reflect the potential effects of the Covid-19 pandemic on
the Social Security program,” the Trustees stated in the annual report.

Social Security’s plight has been obvious for decades and the longer Washington procrastinates, the more difficult the solutions. The Trust Fund Trustees state that ensuring solvency over the next 75 years would require a 3.1- percentage point rise in the 12.4% current payroll tax that is split between employees and employers. Even less politically attractive would be an immediate 19% across-the-board cut in benefits. Waiting for the Trust Fund money to run out in 2035 would require a 4.1-percentage-point rise in the combined payroll tax or a 25% cut in benefits, the Trustees calculate.

If self-funded Social Security benefits are an entitlement that is no longer affordable, so too are state pension fund benefits. Decades of lush retiree benefits, overly-optimistic investment return assumptions, insufficiency pension fund contributions and lengthening retiree life spans have resulted in the liabilities of public pension funds exceeding assets by $1.2 trillion in 2018, according to the latest data and Pew Charitable Trusts. The pandemic will surely worsen the mismatch.