If Congress doesn’t act soon, tens of millions of Americans will only receive about three-quarters of their Social Security benefits when they retire.
Social Security’s trust funds will be tapped out by 2035, according to an annual report released Monday by trustees of the government’s two largest entitlement programs, the other being Medicare. That’s one year later than last year’s report projected.
The new projection doesn’t mean retirees will no longer get checks in 16 years. But the program will at that point only have enough revenue coming in to pay three-quarters of promised benefits through the end of 2093.
The trustees urged lawmakers to act quickly to assure Americans they’ll be able to get their full retirement benefits.
“Lawmakers have a broad continuum of policy options that would close or reduce the long-term financing shortfall of both programs,” wrote Treasury Secretary Steven Mnuchin along with three other trustees, including Alex Azar, secretary of Health and Human Services, in their report to Congress.
But lawmakers have long punted on addressing Social Security problems, which would likely entail raising payroll taxes, curtailing benefits or some combination of both.
During the 2016 campaign, President Donald Trump said he wouldn’t touch Social Security. He didn’t believe he’d need to since his plan to boost economic growth to at least 4% would take care of Social Security’s long-term solvency.
The strong economy has not mitigated the entitlement’s fiscal issues. And the federal government’s deficit has grown, in part because of the 2017 Republican tax cuts.
Also, for the first time since 1982, Social Security’s total cost is expected to exceed its total income in 2020 and continue that way through 2093. This is two years later than projected in last year’s report.
The program would be financed with a combination of interest income and drawing down on the trust funds’ assets until 2035 when the reserves are depleted. Social Security’s costs are expected to rise for the next 20 years as the large Baby Boom generation retires and then remain fairly constant.
At the end of 2018, the Social Security program provided benefits to about 63 million people, mainly retired workers, but also their dependents and their survivors, as well as disabled workers and their dependents.
In terms of Medicare, which covers nearly 60 million Americans, the trustees project that the trust fund for Part A, which covers hospital and nursing home costs for seniors, will be depleted in 2026, the same as last year’s projections. It will then only be able to cover a large share — but not all — of the benefits.
The trust funds for Medicare Part B, which covers doctors’ visits and outpatient services, and Part D, which offers prescription drugs coverage, will remain adequately financed into the “indefinite future.” They are paid for by a combination of enrollees’ premiums, which covers about a quarter of the cost, and money from general federal revenue. The law requires automatic financing of these benefits.