The estimated date in which Social Security’s trust funds will be unable to pay full benefits was moved up a year — from 2035 to 2034, according to the trustees report — a clear signal Americans in and out of Congress need to pay attention to the needs of this program.
The Old-Age and Survivors Insurance Trust Fund, which serves retirees, will not be able to pay full benefits beginning in 2033, according to the report released on Tuesday. The Disability Insurance Trust Fund, which pays benefits to disabled workers and their spouses and children, will be depleted by 2057, eight years sooner than anticipated.
Combined, the two trust funds would be unable to pay full benefits to its beneficiaries beginning in 2034. Medicare’s hospital insurance fund will also be depleted by 2026, an estimate unchanged since last year, the trustees reported.
If nothing is done, Americans will receive approximately a 22% cut to their benefits, the report found. Medicare’s hospital insurance fund, which pays for inpatient care, could pay about 91% of hospital insurance costs after depletion in five years.
Although the program has never failed before, experts say Congress needs to act sooner rather than later.
“Everyone in Congress needs to address the long-term insolvency,” said Max Richtman, president and chief executive officer of the National Committee to Preserve Social Security and Medicare. Congress needs to find a way to boost revenue to the program while also improving it, he added.
The trustees made note of Congress’ need to implement change.
“Lawmakers have many policy options that would reduce or eliminate the long-term financing shortfalls in Social Security and Medicare,” the trustees wrote in a summary of the 2021 reports. “Lawmakers should address these financial challenges as soon as possible. Taking action sooner rather than later will permit consideration of a broader range of solutions and provide more time to phase in changes so that the public had adequate time to prepare.”
In its 86-year history, the Social Security program has never faltered, but legislators have yet to provide a road map for how to fix this insolvency issue. Congress members have offered policy proposals and suggestions, such as increasing the income cap for taxes or raising the retirement age in which people get full benefits. Social Security is often referred to as the “third rail” of politics, as the solutions to improve it are controversial among both political parties and no one wants to touch it.
The last major reform to the program was in the 1980s, Richtman said. The latest trustees report might spark the fire needed to bring change. “There’s so much political pressure from constituents demanding that this be fixed,” he said. “The average benefit is $1,500 a month and to have it reduced is unacceptable.”
Some analysts feared the pandemic would have made the estimates even worse, in part because of the flood of Americans who lost their jobs and were no longer contributing to the payroll taxes that fund Social Security, and due to the workers who were pushed into retirement and ended up claiming Social Security earlier than they might have planned.
The economy rebounded “more quickly than expected” and although revenues for Social Security were down, the numbers didn’t compare to expectations, Kathleen Romig, a senior policy analyst at the Center on Budget and Policy Priorities, tweeted. Romig wrote a thread breaking down the trustees report on Twitter.
Although benefits would still be paid if the trust funds were to be exhausted in 2034, just at a reduced rate, workers of all ages should pay close attention to the news and policies pertaining to Social Security — especially younger folks, said Martha Shedden, president of the National Association of Registered Social Security Analysts. “I don’t want them to worry too much but I also want people to pay attention and to be vested in this program,” she said. “I myself wasn’t counting on Social Security until I started learning about it and understood how much money is at stake.”
For most Americans, Social Security benefits make up a sizable chunk of retirement income. For some, it’s a majority, if not all, of the money they’ll have in retirement.
“For many people, it is their largest retirement asset,” Shedden said. “They should be thinking about it that way and paying attention to it in that manner.”
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