Social Security now expected to run out of cash by 2033: NPR

A Social Security trust fund is expected to run out of cash by 2033, according to new estimates, potentially reducing benefits for millions of Americans who depend on the program.

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A Social Security trust fund is expected to run out of cash by 2033, according to new estimates, potentially reducing benefits for millions of Americans who depend on the program.

Kevin Dietsch/Getty Images

The Social Security program is expected to run out of cash to pay promised benefits a decade from now, while a key trust fund for Medicare will run out of funds by 2031, according to new forecasts released Friday by trustees. two programs.

The projections serve as an annual reminder that popular programs rest on shaky financial foundations. Although any effort to correct them faces strong political opposition, doing nothing is likely to be worse.

Social security benefits for retirees and others are mainly paid for by current workers’ payroll taxes and are supplemented by a trust fund.

Benefits paid out by the program have exceeded monies received since 2021, and the trust fund is now expected to be depleted by 2033. That’s a year earlier than expected last year, thanks in part to slowing economic growth. .

Unless changes are made by then to shore up the program, 66 million Social Security recipients would see their benefits reduced by 23 to 25 percent.

Meanwhile, the Medicare trust fund, which tops up payments to hospitals and nursing homes, is also running out of cash. This could lead to an 11% reduction in the salaries of health care providers unless changes are made by 2031. This deadline is three years later than expected last year.

Administrators predict cost savings for Medicare, thanks to the shift to less expensive outpatient treatments and because some people who would have required the most expensive care died prematurely during the pandemic.

Millions depend on Social Security, Medicare

Treasury Secretary Janet Yellen, who heads the trustees, stressed the importance of supporting the two trust funds to avoid drastic cuts in benefits and provider payments.

“Social Security and Medicare are two foundational programs that older Americans rely on for their retirement security,” Yellen said in a statement. “The Biden-Harris administration is committed to ensuring the long-term sustainability of these essential programs so that retirees can receive the hard-earned benefits that are owed to them.”

President Biden speaks during an event to discuss Social Security and Medicare held at the University of Tampa on February 09, 2023 in Tampa, Florida. The Medicare Trust Fund, which tops up payments to hospitals and nursing homes, is running out of cash.

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President Biden speaks during an event to discuss Social Security and Medicare held at the University of Tampa on February 09, 2023 in Tampa, Florida. The Medicare Trust Fund, which tops up payments to hospitals and nursing homes, is running out of cash.

Joe Raedle/Getty Images

As part of its budget, the Biden administration has proposed extending the life of the Medicare trust fund by 25 years, largely through higher taxes for the wealthy. The administration has not offered similar fixes for Social Security.

The main challenge for Social Security is demographic. As aging baby boomers retire, fewer and fewer workers are contributing to the program to meet rising benefit costs. As of last year, there were only 2.7 workers contributing to the system for every person receiving Social Security benefits.

Additionally, a smaller fraction of income is now subject to payroll taxes that support Social Security.

Fixing the program will require higher taxes, lower benefits, or a combination of both.

“The only responsible thing to do is admit that we need to make changes and we disagree on how to do it, but let’s sit down and try to figure it out,” said Maya Macguineas, president of the Committee for a Responsible Federal Budget. . “If we wait until the last minute, it will be much, much more difficult.”