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Social Security’s trust funds could run short of money in 2034 unless Congress makes moves to shore up the system’s finances, according to the latest projections from the trustees who oversee the funds.
The trustees’ 2023 annual report, issued March 31, moves up by a year the estimated date when the combined funds that pay out Social Security retirement, survivor and disability benefits to some 66 million people would deplete their cash reserves. If that happens, annual revenue into the program will be able to cover only 80 percent of benefits.
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Revised economic expectations are a factor in the change, the report states, with the trustees anticipating lower growth and productivity in the coming decade, compared to last year’s forecast. That translates to slower expected growth in revenue from the payroll taxes that largely fund Social Security.
“More than three years after the start of the COVID-19 pandemic, the acute stage of the pandemic appears to be over, but the trustees expect there will be residual effects on the population and the economy for years to come,” the report says.
By contrast, for the second straight year the trustees forecast a stronger financial footing for Medicare. They estimate the program’s main trust fund, covering hospital insurance, will be able to pay full benefits through 2031, three years longer than projected last year.
“Today’s Social Security and Medicare trustees’ reports reinforce that while they are financially strong today, both programs face long-term funding needs,” AARP Chief Executive Officer Jo Ann Jenkins said in a statement. “Congress must act to find solutions to ensure Social Security and Medicare will be there for the next generation and into the future.”
Social Security reserves dwindling
The yearly report projects Social Security’s fiscal health over a 75-year span, based on economic and actuarial trends that affect how much the system collects in tax revenue and how much it pays out, to how many people and for how long.
Social Security is primarily funded by payroll taxes paid by most U.S. workers. At the end of 2022, the system had a $2.83 trillion surplus, according to the report, built up over decades of incoming revenue exceeding outgoing benefit payments.
But the fiscal balance has shifted in recent years, with the ranks of retirees growing faster than the working population and beneficiaries living longer. To cover benefits, Social Security has begun dipping into the trust fund surplus and will exhaust it in 11 years, according to the new report.
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