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The Voorhes
The trust funds from which Social Security benefits are paid are projected to run short of money by 2035, one year later than estimated last year by the Social Security Board of Trustees.
The trustees’ 2024 annual report, released May 6, cites low unemployment and strong wage growth as factors in the slightly rosier outlook for Social Security. The program primarily relies on payroll taxes paid by almost all U.S. workers to fund benefits for 67 million older Americans, people with disabilities and members of their families.
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Social Security is still paying out more each year to recipients than it collects in revenue, reducing cash reserves that were just shy of $2.8 trillion at the end of 2023. Unless Congress takes action to shore up the program’s finances, the reserve will be used up by 2035 and the program will be able to pay only 83 percent of scheduled benefits, the Trustees estimate.
That, too, marks a modest improvement from last year’s report, which projected an 80 percent payout rate when the trust funds run short.
For the third straight year, Medicare’s trustees forecast a stronger financial footing for the government health care program. Medicare’s main trust fund, covering hospital insurance, will be able to pay full benefits through 2036 — five years later than the trustees projected last year and eight years later than their 2022 estimate.
“While there was good news today in the trustees' reports, older Americans need certainty that Medicare and Social Security will be protected," Jo Ann Jenkins, CEO of AARP, said in a May 6 statement.
"For long-term sustainability, Congress owes it to the American people to reach a bipartisan solution, ensuring people’s hard-earned Social Security benefits will be there in full for the decades ahead. The stakes are simply too high to do nothing.”
'No time to spare'
The report assesses Social Security’s fiscal health over the next 75 years, based on economic and actuarial trends that shape how much the program collects in taxes and other revenue and how much it pays out in retirement, survivor, family and disability benefits.
For decades after Congress passed a bipartisan reform of Social Security’s financial structure in 1983, the program built up reserves as revenue growth outpaced costs. But the balance has shifted in recent years with birth rates declining and retirees growing dramatically in number (and, often, living longer), meaning fewer workers paying into the system for each recipient drawing benefits.
In 2023, Social Security’s revenue totaled $1.351 trillion and expenditures (including administrative costs for running the program) were $1.392 trillion, reducing its reserve from $2.83 trillion to about $2.79 trillion. Based on the new projections, that reserve would be gone by 2035.
That doesn’t mean Social Security payments would end, but they would be funded only by each year’s payroll tax revenue. The trustees estimate that would cover about 83 percent of scheduled benefit payments.
The modest improvement in the trust funds' outlook doesn’t mean “there’s any real movement in the right direction,” says Emerson Sprick, associate director of the Bipartisan Policy Center’s Economic Policy Program. “The trustees have projected trust fund depletion to occur within a three-year window [in the mid-2030s] for the past 13 years, and the scale of the change needed means there is no time to spare.”
“It's easy to get caught up in, is it 2033, is it 2034, and miss the big picture,” says Linda Stone, a senior retirement fellow with the American Academy of Actuaries.
“It really is a demographic issue. You have 11,000 baby boomers turning 65 a day. You only have so many people being born every year. So that ratio of people in the workforce or who could be in the workforce compared to the beneficiaries — that really can’t change,” she says. “Other reforms are going to have to happen to make the program solvent.”
Retirement benefits face cut
The 2035 depletion date and 83 percent payout reflect a combined analysis of Social Security’s two trust funds: Old-Age and Survivors Insurance (OASI), which pays out retirement and survivor benefits, and Disability Insurance (DI), which covers disability benefits. In actuality, the funds function separately and are in very different shape.
According to the new report, the far-larger OASI fund would be able to cover scheduled payments in full until 2033 — the same date the trustees projected last year — after which retirement and survivor benefits would be 21 percent lower. The disability benefits fund is forecast to remain intact and pay scheduled benefits in full through at least 2098, the full 75-year period covered by the report.
To avoid any shortfall, Congress would have to take steps over the next decade to address Social Security’s finances — for example, by cutting benefits, raising taxes, allocating other government revenue for the program or combining elements of these approaches.
A new AARP survey assessing older Americans’ views of Social Security and Medicare found that nearly 90 percent of age 50-plus adults are worried that benefits will be cut and more than 90 percent want Democrats and Republicans to work together to address the programs’ financial problems.
“Congress can and should take action to extend the financial health of the Trust Fund into the foreseeable future, just as it did in the past on a bipartisan basis,” Social Security Commissioner Martin O’Malley said in a statement. “Whether Congress chooses to eliminate the shortfall by increasing revenue, reducing benefits or some combination is a matter of political preference, not affordability.”
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