People leave the Social Security Administration building in Burbank, California.
Valerie Macon | AFP | Getty Images
Social Security directors attributed the slightly improved outlook to more people contributing to the program amid a strong economy, low unemployment, and rising employment and wage growth. Last year, the trustees predicted that the program’s funding would last until 2034, with 80% of benefits paid out.
“This year’s report is good news for the millions of Americans who rely on Social Security, including about 50% of seniors for whom Social Security is the difference between poverty and a dignified life. Potential benefit reduction events are all being pushed forward into 2034 and 2035,” Social Security Secretary Martin O’Malley said in a statement.
Who was O’Malley sworn to He took over the agency in December and also called on Congress to extend the trust fund’s solvency “on a bipartisan basis, as we have in the past.”
“Closing the shortfall will provide relief to more than 70 million Social Security beneficiaries, the 180 million workers and families who contribute to Social Security, and the nation as a whole,” O’Malley said. said.
Social Security’s new 2035 depletion date applies to its combined trust funds.
Trust funds can help pay benefits when more money is needed beyond what is available through payroll taxes. Currently, his 6.2% of a worker’s salary is taxed on Social Security and an additional 1.45% on Medicare. A total of 7.65% is typically matched by the employer. High income earners may have an additional 0.9% withheld for Medicare.
The total depletion date of Social Security’s trust funds is typically used to assess the program’s solvency, but the funds cannot actually be consolidated under current law.
Two of Social Security’s trust funds have clear projected depletion dates.
The fund used to pay out retired workers, their spouses, children and survivors – formally known as the Old Age and Survivors Insurance Trust Fund – is expected to remain in place until 2033, unchanged from last year. At that point, 79% of scheduled benefits may be paid.
The fund used to pay disability benefits (known as the Disability Insurance Trust Fund) will be able to pay full benefits at least until 2098, the last year of the forecast period.
Medicare solvency is typically measured by the ability of trust funds to cover shortfalls in payroll taxes used to finance Part A hospital insurance.
The Medicare Hospital Insurance Trust Fund (used to fund Part A benefits) saw the biggest improvement in this year’s trustee report. The depletion date has been postponed to 2036, five years later than last year’s forecast, due to increased payroll tax revenue and lower spending than projected for 2023.
At that point, 89% of scheduled benefits may be paid.
Medicare’s Supplemental Medical Insurance Trust Fund, which covers optional Part B coverage for physician services and medical supplies and Part D coverage for prescription drugs, is automatically adjusted annually by the Treasury with beneficiary premiums. It relies on contributions from the fund, so it will be funded indefinitely into the future.
While the new projected depletion deadline suggests lawmakers have a little more wiggle room, experts say the solvency of both Social Security and Medicare should be addressed sooner rather than later. There is.
For AARP, this issue is of greatest concern to members age 50 and older, said Bill Sweeney, the group’s senior vice president for government affairs. He said about 40% of households age 65 and older rely on Social Security for at least half of their income, and about 20% of households rely on Social Security for all of their income.
Sweeney said the impending cut in Social Security benefits, or even the topic at all, “is really frightening for people.”
“Congress has a responsibility to sit down and solve this problem in a bipartisan way,” Sweeney said. “And the sooner we do that, the better.”
The new projected depletion dates make the schedules for Social Security and Medicare more similar than previously estimated. That could provide an opportunity for a unified step reform of the program, he suggested.
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