The Social Security program’s reserves will be depleted in 2035, with continuing income to the combined trust funds being sufficient to pay 80% of scheduled benefits, the board of trustees predicted in its annual report, released Monday.
The old age and survivor insurance trust fund reserves are projected to be depleted in 2034, at which time OASI income would be sufficient to pay 77% of OASI scheduled benefits, the report states.
The disability income trust fund’s asset reserves are projected to become depleted in 2052, at which time continuing income to the DI Trust Fund would be sufficient to pay 91% of DI scheduled benefits.
“The report shows the depletion of the combined funds is one year later than projected last year — 2034, last year, and 2035, this year,” Nancy Altman, president of Social Security Works, a group that supports expanding the Social Security system, told ThinkAdvisor in an email message. “That kind of variation is not surprising when projecting out so far into the future.”
The 2019 Trustees Report projects Social Security’s cumulative surplus to be $2.9 trillion, according to Social Security Works. The report shows that Social Security is fully funded until 2035, 93% funded for the next 25 years, 87% funded over the next 50 years, and 84% funded over the next 75 years, the group said.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, added in a Monday statement that the report shows Social Security “faces a nearly $15 trillion funding shortfall and will face insolvency in only 16 years. That’s when today’s 51-year-olds reach the normal retirement age and when today’s youngest retirees turn 78. At that point, if not addressed, the law calls for a devastating 20% across-the-board cut for all Americans who rely on the program.”
Medicare’s Hospital Insurance trust fund will run out even sooner in 2026, when today’s 58-year-olds become eligible and today’s newest beneficiaries turn 72, MacGuineas said.
“The 2019 Social Security Trustees Report confirms that Social Security remains fully affordable, notwithstanding its modest projected shortfall,” Altman said. “The underreported story is that Democrats are moving forward with plans to raise sufficient revenue to eliminate the shortfall and cover the cost of expanded benefits.”
The Social Security 2100 Act, introduced by Rep. John Larson, D-Conn., “has over 200 co-sponsors” in the House, Altman said. “Larson has held several hearings on the bill and intends to bring it to the House floor this spring.”
While the combined basis is the way everyone tends to look at the trust funds, “by law, if either fund is unable to cover all the costs of its benefits and related administrative costs, it would be unable to pay full benefits on time,” Altman explains, but that “has never happened.”
The Social Security 2100 Act, “which expands benefits, has a provision combining the two trust funds so that reality comports with how we all refer to them,” Altman said.
The bill would gradually raise the payroll tax from 12.4% to 14.8% over the next 24 years and subject annual income above $400,000 to the tax. It would also raise the minimum benefit to 25% above the poverty line, link cost-of-living adjustments to the Consumer Price Index for the Elderly and eliminate the taxation of Social Security benefits for those with non-Social Security income above $50,000 for singles and $100,000 for couples, up from $25,000 and $32,000 currently.
Several other bills to protect and expand Social Security benefits have been introduced in the House and Senate, and nearly every 2020 presidential candidate serving in Congress is a member of the bicameral Expand Social Security Caucus, Altman said.
MacGuineas added that That fact that we now can’t guarantee full benefits to current retirees is completely unacceptable, and it should be cause enough for every policymaker to rally around solutions to restore solvency to those programs. Certainly we should be focused on saving Social Security and Medicare before we start promising to expand these programs.
Rep. Kevin Brady, R-Texas, the top Republican on the House Ways and Means Committee, said in a Monday statement that “Social Security reform only has a fair chance of succeeding if it is done with Republicans and Democrats working together. Today’s Trustees Report is an important reminder that the time to act is now.”
Republicans at a recent hearing on Social Security opposed payroll tax increases but appeared open to reducing benefits or making changes to account for longer life spans.
Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare, added in a statement that “This year’s Trustees report shows that, contrary to conservative propaganda, Social Security is not ‘going bankrupt’ or ‘in peril.’”
The system’s financial health “has improved over last year, and Congress now has before it two landmark pieces of legislation that could put Social Security on a sound financial footing for the rest of the century — and provide seniors a modest benefit boost and tax relief,” he said, adding that he “enthusiastically” endorses the Social Security 2100 Act and Sen. Bernie Sanders’ Social Security Expansion Act.
“Both bills ask the wealthy to pay their fair share to strengthen Social Security, something overwhelming majorities of the American people support in poll after poll,” Richtman said.
The trustees of the Medicare program report that the federal senior health care program’s finances look about the same as they did in 2018, he added.
“Medicare’s Part A trust fund will become depleted in 2026, at which time the system still could pay 89% of benefits,” Richtman said. “But, again, this is only if Congress takes no action to bolster Medicare’s finances.”
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