The estimated date when Social Security trust funds will not be able to pay full benefits has been brought forward by one year – from 2035 to 2034, according to the trustees report – a clear signal that Americans in and out of Congress should 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 from 2033, according to the report released on Tuesday. The Disability Insurance Trust Fund, which pays benefits workers with disabilities and their spouses and children, will be exhausted by 2057, eight years earlier than expected.
Combined, the two trust funds would not be able to pay full benefits to their beneficiaries from 2034. Medicare’s hospital insurance fund will also be depleted by 2026, an estimate unchanged from the year. last, the trustees reported.
If left unchecked, Americans will receive about a 22% reduction in their benefits, according to the report. Medicare’s hospital insurance fund, which pays for hospital care, could pay about 91% of the costs of hospital insurance after exhaustion in five years.
Although the program has never failed before, experts say Congress must act as soon as possible.
See: Your retirement is years away. Can you count on Social Security?
âEveryone in Congress has to deal with long-term insolvency,â said Max Richtman, chairman and CEO of the National Committee for the Preservation of Social Security and Medicare. Congress must find a way to increase the program’s revenue while improving it, he added.
Directors took note of the need for Congress to implement the change.
“Lawmakers have many policy options that would reduce or eliminate long-term funding gaps for Social Security and Medicare,” the administrators wrote in a summary of the 2021 reports. âLawmakers should address these financial challenges as soon as possible. Acting as early as possible will allow for a wider range of solutions to be considered and allow more time to gradually introduce changes so that the public has enough time to prepare.
In its 86-year history, the social security program has never wavered, but lawmakers have yet to provide a roadmap for solving this insolvency problem. Members of Congress have presented proposals and policy suggestions, such as increasing the income cap for taxes or raising the retirement age at which people receive full benefits. Social security is often referred to as the âthird railâ of politics, as solutions to improve it are controversial between the two political parties and no one wants to touch it.
The last major reform of the program took place in the 1980s, Richtman said. The latest directors report could set off the fire needed to make the change. “There is so much political pressure from voters demanding that this be corrected,” he said. âThe average benefit is $ 1,500 per month and its reduction is unacceptable. ”
Also see: Retirement security “more fragile than ever” and “Americans are not saving enough” for old age
Some analysts feared the pandemic had worsened estimates, in part because of the flood of Americans who lost their jobs and were no longer contributing to payroll taxes that fund Social Security, and because of workers who were pressured to leave. retirement and ended up claiming Social Security sooner than they expected.
The economy has rebounded “faster than expected” and although Social Security revenues have fallen, the numbers do not compare to expectations, tweeted Kathleen Romig, senior policy analyst at the Center on Budget and Policy Priorities. Romig wrote a thread for the Directors Report on Twitter.
While benefits would still be paid if trust funds were depleted in 2034, at a reduced rate, workers of all ages should pay close attention to social security news and policies – especially younger ones, a said Martha Shedden, president. of the National Association of Chartered Social Security Analysts. âI don’t want them to worry too much, but I also want people to pay attention and get involved in this program,â she said. “Myself, I wasn’t relying on Social Security until I started to learn it and understood how much money is at stake.”
For most Americans, Social Security benefits are an important part of retirement income. For some, it is most, if not all, of the money they will have in retirement.
âFor a lot of people, this is their biggest retirement asset,â Shedden said. “They should think of it that way and pay attention to it that way.”