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SSDI fund solvency: the problem and a few potential solutions

Those in Wisconsin who are not disabiled may be confused about Social Security and think that it only helps provide a basic income to those who are retired. People with disabilities know differently. Those with disabilities may be confused however about the funding of the program. Contrary to the perception of many, the funding for retirement benefits and SSDI benefits are separate.

The fund which pays for Social Security disability insurance will become insolvent, if nothing changes, on October 1, 2015. In a little less than four years it will run out of money, when just a few years ago there was a surplus. Which begs the question -- where did the money go?

The money went in a few places, one of which is to pay for benefits to those with disabilities. As the baby boomers age, they are increasingly becoming disabled due to accidental injuries, diseases and mental conditions. There are reportedly 2 million more people receiving SSDI benefits compared to before the most recent recession.

Another place the money went is to another governmental body. The U.S. Treasury borrowed assets from the program when it was in surplus and those assets are currently in special bonds or non-marketable IOUs. When the bonds are depleted the SSDI program will be insolvent according to reliable sources.

There are a few potential solutions that could be implemented, either together or singly, to kick the solvency can down the road.

  • Raise taxes (not a preferred method)
  • Eliminate the exemption for SS withholding which is currently set at $110,100 in annual income
  • Raise the cap for SS collection to $180,000

The last suggestion in the list above would reportedly generate $500 billion during the next ten years. Whatever solution, or group of solutions, is chosen, some action will need to be taken in the near future to provide for the fund's solvency which in turn provides disability benefits to more than nine million Americans.

Source: PolicyMic, "Fiscal Cliff 2013: Social Security is the Debt Crisis No One is Talking About," Rick Mathews, Nov. 26, 2012

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