The deadline for reconstitution of social security is extended. The federal retirement program said Monday it may not need to cut benefits until 2035, a year later than expected, because of better U.S. performance.
The new projections, from the Social Security Board of Trustees’ annual report, are “good news” for the program’s 70 million beneficiaries, Social Security Commissioner Martin O’Malley said in a statement. Even so, he urged Congress to take steps to shore up the program to ensure it can pay out full benefits “in the near future.”
Social Security relies on its trust funds to provide monthly checks to beneficiaries, with the funds primarily financed by payroll taxes that workers and businesses pay with each paycheck. But the fund’s reserves are shrinking because spending outpaces income, in part because of the wave of baby boomer retirements and the aging of the U.S. population.
Experts emphasize that if trust funds are exhausted, profits will not suddenly disappear. Instead, Social Security recipients will face a reduction in their monthly checks, with the agency predicting Monday that recipients would lose 17% of their current benefits.
That would be painful for millions of retired and disabled Americans, but it represents a modest improvement from last year, when the Social Security Administration predicted benefits would be cut to nothing. could be reduced by 23% if the trust funds reached the point of exhaustion.
Advocates for older Americans welcomed the improving outlook, while pressuring Congress to take steps to strengthen the program.
“Congress owes it to the American people to reach a bipartisan solution, ensuring that people’s hard-earned Social Security benefits are paid in full for decades to come,” AARP CEO Jo Ann Jenkins said in a statement. “The stakes are simply too high to do nothing.”
Economic boost
O’Malley attributed Social Security’s improved forecast to a stronger economy, pointing to what he called “impressive wage growth, historic job creation and a stable, low unemployment rate.” In other words, a healthy job market This results in an increase in social security deductions from the fund’s coffers.
The report comes as Social Security’s financial outlook has become a political lightning rod, with Republicans proposing to raise the retirement age to be raised — effectively cutting welfare 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 incomes above $168,600 are exempt from Social Security payroll taxes.
Medicare “bankruptcy” 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 higher tax revenues and lower-than-expected spending. Medicare is the federal government’s health insurance program that covers people age 65 and older as well as those with a disability or serious illness. It covered more than 66 million people last year, most of whom were aged 65 and over.
Once the fund’s reserves are exhausted, Medicare would be able to cover only 89 percent of the costs of patients’ hospital visits, hospice care, and nursing home stays or home health care that follow the visits to the hospital.
In a statement Monday, President Joe Biden credited his administration’s economic policies with improving prospects for Social Security and Medicare.
“Since I took office, my economic plan and strong recovery from the pandemic have helped extend Medicare’s solvency by a decade, with today’s report showing five full years of additional solvency” , did he declare. “I am committed to expanding the solvency of Social Security by asking the highest-income Americans to pay their fair share without cutting benefits or privatizing Social Security.”
—With reporting from the Associated Press.
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