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The financial crunch facing the SSD trust fund

There are currently over eight million Americans who rely on their Social Security disability benefits to help keep a roof over their head, food on the table and just make ends meet. For many of these people, every cent matters, such that any reduction in disability benefits will more than likely prove to be life changing.

Unfortunately, this reduction in benefits could become a reality sooner than later unless Congress takes the necessary steps to insure the solvency of the trust fund for SSD benefits, which exists as a separate entity from the trust fund for retirement benefits.

Sources indicate that the SSD trust fund is currently on pace to be in the red somewhere between 2016 and 2017 unless Congress takes definitive action earlier. If this fails to happen, it's estimated that the Social Security Administration would only be able to pay 80 percent of benefits to disabled Americans, which amounts to the loss of several hundred dollars per month.

What then can Congress do to ensure that this doesn't happen?

According to political experts, there are multiple scenarios that could play out:

  • Congress could act on the solvency deadline as soon as next year in light of the fact that 2016 is a significant election year.
  • Congress could approach the solvency deadline as closely as possible before finally taking action (much like the debt-ceiling negotiations).
  • Congress could simply let the solvency deadline pass without taking any action whatsoever, meaning benefits would be reduced.

A more realistic -- and far more likely -- outcome, say experts, is that Congress will do what it has done in the past when confronted with solvency issues regarding the SSD trust fund: reallocate revenue to it from the retirement trust fund for the next decade-plus.

While we can hope Congress takes the necessary action to ensure that there is no reduction in SSD benefits, we can also hope also that it finally begins to address how it plans to keep the SSD trust fund solvent over the long run, such that future generations can count on the program being in place.

Source: CNN, "The Social Security cash crunch Congress can't ignore," Jeanne Sahadi, June 17, 2014

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