What Will the Fed's 2022 Taper Plans Mean for Social Security?
Social Security's Trust Funds currently have just over $2.8 trillion in assets in them, yet those funds are expected to run dry by 2034, which would cut benefits by nearly a quarter. A key reason for the trust funds' challenges comes from the way they're designed. They only hold U.S. Treasury debt, which right now pays the program a weighted interest rate below 2.4%.
When that interest rate is compared with the whopping 5.9% increase in per recipient benefits Social Security has to pay out this year due to inflation, it's no wonder the trust funds are in trouble. They simply can't earn enough to keep up with the increases that the program has to pay out.
Still, some hope may very well be on the horizon. While the stock market has gotten a bit nervous when it comes to the Federal Reserve's plans to start tapering its bond purchase program, that news may very well mean good things for Social Security. Indeed, it could help both increase Social Security's return on its investments and reduce the amount the program needs to pay out over time.
Source Fool.com
