The Social Security trust funds that about 67 million Americans rely on for benefits are scheduled to be depleted in 2034, one year earlier than was projected last year, according to the annual trustees’ report released by the Treasury Department today.
Unless Congress takes action, at that time, 80 percent of scheduled benefits will be payable from the combined funds for old age and survivors insurance and disability insurance.
The new depletion date comes as the trustees updated their projections for the U.S. economy to include recent output and inflation. The expected levels of gross domestic product and labor productivity were revised down by about three percent for the projected time period, which worsened the outlook for Social Security’s combined funds, according to the report.
Meanwhile, Medicare’s hospital insurance trust fund will be able to pay 100 percent of scheduled benefits until 2031, three years later than projected last year.
The new estimates prompted renewed calls for fixes to the programs, which Treasury Secretary Janet Yellen referred to as “bedrock programs that older Americans rely upon for their retirement security.”
“The Biden-Harris Administration is committed to ensuring the long-term viability of these critical programs so that retirees can receive the hard-earned benefits they’re owed,” Yellen said in a statement.
The White House earlier this month laid out a plan to extend the solvency of Medicare’s hospital insurance trust fund, also known as Medicare Part A, which covers hospital, nursing facility and hospice services for eligible beneficiaries.
The proposal aims to extend the hospital insurance fund for 25 years by increasing the Medicare tax rate for incomes over $400,000 while closing loopholes that enable income to be shielded from that tax.
However, the White House has not put forth any specific proposal for resolving Social Security’s funding woes, though Biden has called for protecting and strengthening the program with his budget.
“Congress must take its responsibility to protect Social Security and Medicare seriously, by developing a comprehensive plan and doing so in a way that is accountable and fully transparent to the American public,” AARP CEO Jo Ann Jenkins said in a statement.
Meanwhile, the Social Security Board of Trustees today released its annual report on the financial status of the Social Security Trust Funds.
The combined asset reserves of the Old-Age and Survivors Insurance and Disability Insurance (OASI and DI) Trust Funds are projected to become depleted in 2034, one year earlier than projected last year, with 80 percent of benefits payable at that time.
The OASI Trust Fund is projected to become depleted in 2033, one year sooner than last year’s estimate, with 77 percent of benefits payable at that time. The DI Trust Fund asset reserves are not projected to become depleted during the 75-year projection period.
In the 2023 Annual Report to Congress, the Trustees announced:
· The asset reserves of the combined OASI and DI Trust Funds declined by $22 billion in 2022 to a total of $2.830 trillion.
· The total annual cost of the program is projected to exceed total annual income in 2023 and remain higher throughout the 75-year projection period. Total cost began to be higher than total income in 2021. Social Security’s cost has exceeded its non-interest income since 2010.
· The year when the combined trust fund reserves are projected to become depleted, if Congress does not act before then, is 2034. At that time, there would be sufficient income coming in to pay 80 percent of scheduled benefits.
“The Trustees continue to recommend that Congress address the projected trust fund shortfalls in a timely fashion to phase in necessary changes gradually,” said Kilolo Kijakazi, Acting Commissioner of Social Security. “Social Security will continue to play a critical role in the lives of 67 million beneficiaries and 180 million workers and their families during 2023. With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.”
Other highlights of the Trustees Report include:
· Total income, including interest, to the combined OASI and DI Trust Funds amounted to $1.222 trillion in 2022. ($1.107 trillion from net payroll tax contributions, $49 billion from taxation of benefits, and $66 billion in interest)
· Total expenditures from the combined OASI and DI Trust Funds amounted to $1.244 trillion in 2022.
· Social Security paid benefits of $1.232 trillion in calendar year 2022. There were about 66 million beneficiaries at the end of the calendar year.
· The projected actuarial deficit over the 75-year long-range period is 3.61 percent of taxable payroll – higher than the 3.42 percent projected in last year’s report.
· During 2022, an estimated 181 million people had earnings covered by Social Security and paid payroll taxes.
· The cost of $6.7 billion to administer the Social Security program in 2022 was a very low 0.5 percent of total expenditures.
· The combined trust fund asset reserves earned interest at an effective annual rate of 2.4 percent in 2022.
The Board of Trustees usually comprises six members. Four serve by virtue of their positions with the federal government: Janet Yellen, Secretary of the Treasury and Managing Trustee; Kilolo Kijakazi, Acting Commissioner of Social Security; Xavier Becerra, Secretary of Health and Human Services; and Julie Su, Acting Secretary of Labor. The two public trustee positions are currently vacant.
View the 2023 Trustees Report at www.socialsecurity.gov/OACT/TR/2023/.