Liam Conner
The deadline for replenishing Social Security is being extended. The federal retirement program said Monday it may not need to cut benefits until 2035, a year later than previously anticipated, due to stronger U.S. performance.
The new projection, from the Social Security Board of Trustees annual report, amounts to “good news” for the program’s 70 million beneficiaries, Social Security Commissioner Martin O’Malley said in a statement declaration. Still, he urged Congress to take steps to bolster the program and ensure it can pay full benefits “in the near future.”
Social Security relies on its trust funds to provide monthly checks to beneficiaries, with the funds financed primarily through payroll taxes that workers and businesses provide with each paycheck. But fund reserves are dwindling because spending is outpacing income, in part due to a wave of baby boomer retirements and the aging U.S. population.
Experts stress that if trust funds are exhausted, the benefits will not suddenly disappear. Instead, Social Security beneficiaries will face a cut in their monthly checks, with the agency projecting Monday that beneficiaries would lose 17% of their current benefits.
That would be painful for millions of retired and disabled Americans, but it represents a modest improvement over last year, when the Social Security Administration predicted that benefits could be reduced by 23% if the trust funds reached the point of depletion.
Advocates for older Americans have praised the improved outlook while pressing Congress to take action to bolster the program.
“Congress owes it to the American people to reach a bipartisan solution ensuring that people’s hard-earned Social Security benefits will be fully available for decades to come,” AARP CEO Jo Ann Jenkins said in a statement. “The risks are simply too high to do nothing.”
Economic boost
O’Malley attributed the improved Social Security forecast to the strengthening economy, pointing to what he called “impressive wage growth, historic job creation and a low and stable unemployment rate.” In other words, a healthy job market It’s resulting in more Social Security taxes going into trust coffers.
The report comes at a time when Social Security’s financial outlook has become a political lightning rod, with Republicans proposing that the retirement age grow — effectively cutting benefits for millions of current workers — and former President Donald Trump indicating he would be open to cuts to Social Security and Medicare.
Democrats argue there are other ways to fix the program without cutting benefits, such as raising the payroll tax cap. Currently, individual income above $168,600 is exempt from Social Security payroll tax.
Medicare “Breaking” Date
Meanwhile, Medicare’s bankruptcy date for its hospital insurance trust fund was pushed back five years to 2036 in the latest report, thanks in part to rising payroll tax revenues and lower-than-expected spending. Medicare is the federal government’s health insurance program that covers people aged 65 and over and people with disabilities or serious illnesses. It covered more than 66 million people last year, the majority aged 65 and over.
When the fund’s reserves are exhausted, Medicare will be able to cover only 89% of the costs of patients’ hospital visits, hospice care, and nursing home stays or home health care that follow hospital visits.
In a statement released Monday, President Joe Biden credited his administration’s economic policies with the stronger prospects for Social Security and Medicare.
“Since taking office, my economic plan and strong recovery from the pandemic have helped extend Medicare’s solvency by a decade, with today’s report showing a full five years of additional solvency,” he said. “I am committed to expanding Social Security’s solvency by asking higher-income Americans to pay their fair share without cutting benefits or privatizing Social Security.”
—With reporting from the Associated Press.
