Social Security now expected to run short on funds in 2035, one year later than previously projected, Treasury says

The
trust
funds
the
Social
Security
Administration
relies
on
to
pay
benefits
are
now
projected
to
run
out
in
2035,
one
year
later
than
previously
projected,
according
to
the

annual
trustees’
report
released
Monday.

On
the
projected
depletion
date,
83%
of
benefits
will
be
payable
if

Congress
does
not
act
sooner
to
prevent
that
shortfall.

The
Social
Security
trustees
credited
the
slightly
improved
outlook
to
more
people
contributing
to
the
program
amid
a
strong
economy,
low
unemployment
and
higher
job
and
wage
growth.
Last
year,
the
trustees
projected
the
program’s
funds
would

last
through
2034,
when
80%
of
benefits
would
be
payable.

“This
year’s
report
is
a
measure
of
good
news
for
the
millions
of
Americans
who
depend
on
Social
Security,
including
the
roughly
50%
of
seniors
for
whom
Social
Security
is
the
difference
between
poverty
and
living
in
dignity
—
any
potential
benefit
reduction
event
has
been
pushed
off
from
2034
to
2035,”
Social
Security
Commissioner
Martin
O’Malley
said
in
a
statement.

O’Malley,
who
was

sworn
in
to
lead
the
agency
in
December,
also
urged
Congress
to
extend
the
trust
fund’s
solvency
“as
it
did
in
the
past
on
a
bipartisan
basis.”

“Eliminating
the
shortfall
will
bring
peace
of
mind
to
Social
Security’s
70
million-plus
beneficiaries,
the
180
million
workers
and
their
families
who
contribute
to
Social
Security,
and
the
entire
nation,”
O’Malley
said.

Social
Security’s
new
2035
depletion
date
applies
to
its
combined
trust
funds.

The
trust
funds
help
pay
for
benefits
when
more
money
is
needed
beyond
what
is
coming
in
through
payroll
taxes.
Currently,
6.2%
of
workers’
pay
is
taxed
for
Social
Security,
while
an
additional
1.45%
is
taxed
for
Medicare.
The
total
7.65%
is
typically
matched
by
employers.
High
earners
may
have
an
additional
0.9%
withheld
for
Medicare.

While
the
combined
depletion
date
for
Social
Security’s
trust
funds
is
typically
used
to
gauge
the
program’s
solvency,
the
funds
cannot
actually
be
combined
based
on
current
law.

Social
Security’s
two
trust
funds
have
distinct
projected
depletion
dates.

The
fund
used
to
pay
retired
workers,
their
spouses
and
children,
and
survivors
—
formally
known
as
the
Old-Age
and
Survivors
Insurance
Trust
Fund
—
is
projected
to
last
until
2033,
which
is
unchanged
from
last
year.
At
that
time,
79%
of
those
scheduled
benefits
may
be
payable.

The
fund
used
to
pay
disability
benefits
—
known
as
the
Disability
Insurance
Trust
Fund
—
will
be
able
to
pay
full
benefits
until
at
least
2098,
the
last
year
of
the
projection
period.

Also
on
Monday,
the
government
updated
its
projections
for
Medicare.
For
most
older
Americans,
the
program
is
their
primary
or
only
source
of
health
care,
according
to
the
AARP.

Medicare
solvency
is
typically
measured
by
the
ability
of
the
trust
fund
to
make
up
for
a
shortfall
in
payroll
taxes
used
to
fund
Part
A
hospital
insurance.

The
Medicare
Hospital
Insurance
trust
fund
—
used
to
fund
Part
A
benefits
—
saw
the
biggest
improvement
in
this
year’s
trustees
report.
Its
depletion
date
is
now
pushed
to
2036
—
five
years
later
than
was
projected
last
year
—
due
in
part
to
higher
payroll
tax
income
and
lower-than-projected
2023
expenditures.

At
that
time,
89%
of
scheduled
benefits
may
be
payable.

Medicare’s
Supplemental
Medical
Insurance
Trust
Fund
—
which
covers
voluntary
Part
B
coverage
for
physician
services
and
medical
supplies
and
Part
D
prescription
drug
coverage
—
is
financed
for
the
indefinite
future,
since
it
relies
on
beneficiary
premiums
and
Treasury
Department
contributions
that
are
automatically
adjusted
each
year. 

While
the
new
projected
depletion
dates
show
lawmakers
have
slightly
more
wiggle
room,
experts
say
the
solvency
of
both
Social
Security
and
Medicare
should
be
addressed
sooner
rather
than
later.

The
issue
is
a
top
concern
for
AARP
members
ages
50
and
up,
said
Bill
Sweeney,
the
organization’s
senior
vice
president
of
government
affairs.
About
40%
of
families
who
are
65
and
older
rely
on
Social
Security
for
at
least
half
of
their
income,
and
about
20%
of
families
rely
on
it
for
all
of
their
income,
he
said.

For
any

reductions
to
be
on
the
horizon
for
Social
Security
benefits,
or
for
that
to
even
be
talked
about,
is
“really
scary
for
people,”
Sweeney
said.

“Congress
has
a
responsibility
to
sit
down
and
work
this
out
in
a
bipartisan
way,”
Sweeney
said.
“And
the
sooner
they
do
it,
the
better.”

The
new
projected
depletion
dates
put
Social
Security
and
Medicare
on
a
more
similar
timeline
than
previous
estimates.
That
may
offer
the
opportunity
for
a
unified
one-step
reform
for
the
programs,
he
suggested.

“In
order
to
make
these
trust
funds
whole
for
the
future,
some
tough
choices
are
going
to
need
to
be
made,”
Sweeney
said.

Prospective
changes
may
include
tax
increases,
benefit
cuts
or
a
combination
of
both.

The
status
of
Social
Security’s
trust
funds
has
worsened
compared
with
what
was
projected
when
the
last
major
reforms
were
enacted
in
1983,
senior
Treasury
officials
said
Monday.
Between
1983
and
2000,
the
top
6%
of
earners
saw
faster
increases
in
pay
versus
the
remaining
94%.
Social
Security
does
not
necessarily
benefit
from
high
earners’
wage
gains,
since
high
earners stop
paying taxes
into
the
program each
year after
they
reach
a

maximum
annual
earnings
threshold.

Democrats

have
proposed
addressing
those
inequities
with
tax
increases
on
the
wealthy,
while
also
making
benefits
more
generous.

Republicans
have
advocated
for
forming
bipartisan
commissions
to
address
the
programs’
solvency
issues.

While
updates
on
the
status
of
Social
Security
and
Medicare
are
released
annually,
Congress
has
yet
to
act.

“We’re
driving
straight
into
this
mess
despite
all
the
warning
bells
and
alarms
that
the
trustees
and
others
have
been
ringing
for
decades
now,”
Maya
MacGuineas,
president
of
the
Committee
for
a
Responsible
Federal
Budget,
said
in
a
statement.

“Every
year
we
get
closer
to
the
deadline,
we
seem
to
get
further
away
from
the
solutions,”
she
said.