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Yahoo
09-07-2025
- Business
- Yahoo
Social Security's go-broke date pushed up in new report
The combined trust funds for Social Security are projected to run out in 2034, a year earlier than previously predicted, a board of trustees of the program's accounts said in a new report released Wednesday. The report projected that the program's Old-Age and Survivors Insurance (OASI) fund would be able to cover '100 percent of total scheduled benefits until 2033,' while the Disability Insurance (DI) trust fund is estimated to be able to pay '100 percent of total scheduled benefits through at least 2099.' But when the projections are combined, the resulting fund is estimated to only be able to cover '100 percent of total scheduled benefits until 2034, one year earlier than reported last year.' Once the reserves are depleted, the report estimates the total fund income would be able to pay 81 percent of scheduled benefits. The report said the depletion dates for the funds had advanced by about three-quarters compared with the previous year's projections. The report cited last year's passage of the Social Security Fairness Act as a key factor behind the shift in the funds' projected depletion dates. The bipartisan bill, which former President Biden signed into law in January, repealed two tax rules that proponents say have unfairly reduced benefits for many Americans who also receive government pensions. But many experts sounded the alarm over its expected price tag and raised questions of fairness around the legislation. The new report said on Wednesday that the repeal of the tax rules 'increased projected Social Security benefit levels for some workers, relative to projected benefit levels in last year's report,' while singling out the legislation's impact as 'the primary contributor to the change' in the combined trust fund depletion date this year. Two other factors the board pointed to were the trustees' extension of the 'assumed period of recovery from historically low levels of fertility by 10 years' and its lowering of 'the assumed long-term share of Gross Domestic Product (GDP) that accrues to workers in the form of labor compensation.' Medicare's hospital insurance trust fund is running out of money, and is scheduled to be depleted in 2033, three years earlier than reported last year, according to the program's trustees. The Hospital Insurance (HI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033. At that point, it will only be sufficient to pay 89 percent of total scheduled benefits. The change is due to higher-than-expected spending on hospice and inpatient care in the earlier years of the projection, the report said. Medicare trustees have sounded the alarm on the Hospital Trust Fund for years, though the warnings have mostly been ignored by Congress, as lawmakers view Medicare reforms as a political third rail. The trustees recommended Congress increase the standard payroll tax rate or reduce Medicare spending to address future shortfalls. Nathaniel Weixel contributed. Updated at 5:07 p.m. EDT Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
The Hill
24-06-2025
- Business
- The Hill
Social Security's dirty little secret: A Game of borrowing
The Social Security trustees have released their annual report highlighting 'the current and projected financial status' of the Social Security trust fund. And the media duly reported on the fund's declining prospects. But neither the trustees nor the media revealed, or typically even acknowledged, the trust fund's dirty little secret. First, a short explanation of how Social Security works. Social Security is a pay-as-you-go system. The FICA payroll tax (12.4 percent) is taken from current workers and employers and deposited into the Social Security trust fund. The government then uses that trust-fund money to pay current retirees. Money in, money out. For most of Social Security's history, current workers were paying in more than was needed to pay retiree benefits, leaving annual trust-fund surpluses. This is why, today, the trust fund boasts some $2.5 trillion in assets, which leaves the impression that there is something like a savings account that can be used to pay Social Security benefits. Unfortunately, however, since 2010 the government has spent more paying benefits that it has received from workers' payroll taxes each year. The government has had to draw upon the trust fund surplus to make up the difference. According to what the trustees call their 'best estimates,' 'The Old-Age and Survivors Insurance (OASI) Trust Fund [that is, Social Security] will be able to pay 100 percent of total scheduled benefits until 2033, unchanged from last year's report. At that time, the fund's reserves will become depleted and continuing program income will be sufficient to pay 77 percent of total scheduled benefits.' The key thing to notice is the claim that by 2033 'the fund's reserves will become depleted.' But what if the trust fund is already essentially, if not technically, depleted? The trustees report that the OASI trust fund had $2.641 trillion at the end of 2023. The trust fund received $1.106 trillion in payroll taxes in 2024, plus $54 billion from taxes collected on Social Security benefits and $64 billion in interest. That's a total income of $1.224 trillion. However, Social Security paid out $1.327 trillion in 2024 — more than it received — meaning it had to withdraw $103 billion from the trust fund, leaving $2.538 trillion. And then here's the dirty little secret about the trust fund: That $2.5 trillion isn't invested in stocks or bonds or loaned out to interest-paying banks or companies. The federal government has borrowed that money and spent it, writing itself interest-bearing IOUs. As the Peter G. Peterson Foundation explains, 'As with other trust funds, Social Security's surpluses are credited with securities issued by the Treasury; that excess income is used to reduce the amount of new federal borrowing necessary to finance governmental activities.' Consider this situation in a family context. Suppose a family's income is usually enough to pay the bills each month. But an unexpected debt — perhaps a car repair bill, a hospital visit, home repair, etc. — arrives, and it's more than the family's normal budget. If the family has other real assets, it can withdraw funds from a savings account or perhaps a brokerage account and pay the debt. Problem solved. But if the family doesn't have other real assets available, it might have to borrow the money to pay the debt — creating new debt to pay old debt. When the trustees speak of drawing down the 'fund's reserves,' it sounds like the government is doing what the family did when it tapped other assets to pay the unexpected debt. But that's not what's really happening. If the government's general account had a budget surplus in 2024, then the government could just transfer $103 billion from the general account to the trust fund. But the federal government had a $1.8 trillion deficit in 2024. So, in order to cover that $103 billion trust fund shortfall to pay current retirees, the government had to borrow the money. Creating new debt to pay old debt. It's even borrowing money at interest to pay the trust fund interest. Whenever anyone exposes this borrowing shell game, defenders of Social Security's pay-as-you-go system — usually Democrats — vigorously respond by saying the federal government has never defaulted on its debt. But that misses the point. The trust fund's assets are just an entry on paper. If the Social Security trust fund wants to redeem some of its IOUs, the government must borrow the money to pay it. So, when the trustees warn that by 2033 Social Security won't have the money to pay retirees' full benefits, it would be more accurate to say it already doesn't have the money to pay full benefits now. Merrill Matthews is a public policy and political analyst and the co-author of 'On the Edge: America Faces the Entitlements Cliff.'.
Yahoo
20-06-2025
- Business
- Yahoo
Social Security trust fund now projected to run dry in 2034, triggering massive benefit cuts
The trustees for Social Security and Medicare released their annual report on the status of the entitlement programs' trust funds, which are expected to be depleted sooner than previously thought. The Social Security and Medicare trustees "found that the Social Security and Medicare programs both continue to face significant financing issues." Trustees found that if Social Security's Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust funds were combined, the trust funds would be able to pay 100% of scheduled benefits until 2034, one year earlier than reported last year. The depletion dates for both Social Security trust funds advanced by three calendar quarters compared to last year. At the time of depletion in 2034, the trust funds would be able to pay only 81% of scheduled benefits, meaning Social Security recipients would see a mandatory 19% cut automatically. That's because Social Security benefits are financed through a combination of payroll taxes from current workers along with the trust funds, which would leave the program relying solely on payroll tax revenue once the trust funds are depleted. Cbo Says Us Budget Deficits To Widen, National Debt To Surge To 156% Of Gdp For comparison, the average monthly Social Security benefit as of January 2025 was $1,976, according to Social Security Administration (SSA) data. A cut of 19% would amount to a reduction of $376 per month, lowering the payment to $1,600 a month. Read On The Fox Business App Medicare's Hospital Insurance (HI) trust fund is projected to be depleted in 2033, three years earlier than last year's report, according to the trustees. At that time, 89% of scheduled benefits would be payable, leading to an 11% reduction in payments relative to pre-depletion levels. "The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust their expectations and behavior," the report said. Social Security Payments To Increase For Public Pension Recipients "With informed discussion, creative thinking, and timely legislative action, Social Security and Medicare can continue to protect future generations," the trustees added. The Social Security and Medicare trust funds are facing depletion due to the aging of America's population relative to prior decades, as the ratio of workers to retirees has shifted. Data from the SSA shows the ratio of covered workers paying taxes to the number of beneficiaries was 8.6 workers to beneficiaries as of 1955. That number has declined to 2.8 as of 2013 due to the aging of the population. The Federal Deficit Keeps Growing, And The Congressional Budget Office Has Solutions "Social Security and Medicare won't even be able to pay full benefits to current retirees – they will be insolvent when today's 59-year-olds reach the full retirement age and today's youngest retirees turn 70," Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget, said in a statement. "Where is the sense of urgency? "It's time to start telling the truth when it comes to Social Security and Medicare. We are running out of time to phase in changes gradually and avoid harsh cuts, sharp tax increases or unacceptable borrowing," MacGuineas added. "Demagoguing this issue may be politically expedient, but it will ultimately prove ruinous for the tens of millions of Americans that rely on the programs." AARP CEO Myechia Minter-Jordan said in a statement it's critical for Americans to be able to rely on Social Security and Medicare in their retirements and urged Congress to take steps to protect the programs. "AARP members and older Americans nationwide consistently say that the future of Social Security and Medicare are the issues they care about most, and they stand ready to hold politicians across party lines accountable to strengthen these programs for the long term," Minter-Jordan article source: Social Security trust fund now projected to run dry in 2034, triggering massive benefit cuts Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
The Hill
18-06-2025
- Business
- The Hill
Social Security's go-broke date pushed up in new report
The combined trust funds for Social Security are projected to run out in 2034, a year earlier than previously predicted, a board of trustees of the program's accounts said in a new report released Wednesday. The report projected that the program's Old-Age and Survivors Insurance (OASI) would be able to cover '100 percent of total scheduled benefits until 2033,' while the Disability Insurance (DI) trust fund is estimated to be able to pay '100 percent of total scheduled benefits through at least 2099.' But when the projections are combined, the resulting fund is estimated to only be able to cover '100 percent of total scheduled benefits until 2034, one year earlier than reported last year.' Once the reserves are depleted, the report estimated the total fund income would be able to pay 81 percent of scheduled benefits. The report said the depletion dates for the funds had advanced by about three-quarters compared to the previous year's projections. The report cited last year's passage of the Social Security Fairness Act as a key factor behind the shift in the funds' projected depletion dates. The bipartisan bill, which former President Biden signed into law back in January, repealed two tax rules that proponents say have unfairly reduced benefits for many Americans who also receive government pensions. But many experts sounded the alarm over its expected price tag and raised questions of fairness around the legislation. The new report said on Wednesday that the repeal of the tax rules 'increased projected Social Security benefit levels for some workers, relative to projected benefit levels in last year's report,' while singling out the legislation's impact as 'the primary contributor to the change' in the combined trust fund depletion date this year. Two other factors the board pointed to were the trustees' extension of the 'assumed period of recovery from historically low levels of fertility by 10 years' and its lowering of 'the assumed long-term share of Gross Domestic Product (GDP) that accrues to workers in the form of labor compensation.'
USA Today
18-06-2025
- Business
- USA Today
The Social Security crisis is coming one year earlier than we thought
The Social Security crisis is coming one year earlier than we thought Show Caption Hide Caption Social Security uncertainty and policy changes are driving more people to file With a significant rise in Social Security applications, retirees face financial decisions influenced by legislation and economic concerns in today's climate. Scripps News The Social Security shortfall date just moved a little bit nearer. New federal projections, released on June 18, show that the combined Social Security trust funds will pay 100% of benefits until 2034 before becoming depleted. That date is one year earlier than the Social Security Administration reported a year ago. 'As in prior years, we found that the Social Security and Medicare programs both continue to face significant financing issues,' program trustees wrote in a summary of their 2025 annual report. The Social Security Administration faces a funding crisis in the not-so-distant future. Trustees say the projected shortfall in retirement benefits has risen to $25.1 trillion through 2099, up from $22.6 trillion a year ago. The Old-Age and Survivors Insurance (OASI) Trust Fund, which pays benefits to retirees and their families, is projected to pay total scheduled benefits until 2033, according to the new report. 'At that time, the fund's reserves will become depleted and continuing program income will be sufficient to pay 77% of total scheduled benefits,' the report states. The separate Disability Insurance Trust Fund is fully funded through at least 2099, the agency reports. The combined programs, however, can pay 100% of benefits only through 2034. At that point, the program's reserves would be depleted. New Social Security shortfall dates alarm retirement advocates Retirement advocates sounded alarm at the findings. The new projections "show the trust fund for Social Security is going to be depleted one year sooner than was projected last year, which means that Social Security recipients may see a 19% reduction in their Social Security income one year sooner," said Myechia Minter-Jordan, CEO of AARP, in a statement. "Congress must act to protect and strengthen the Social Security that Americans have earned and paid into throughout their working lives. More than 69 million Americans rely on Social Security today and as America's population ages, the stability of this vital program only becomes more important." Social Security faces a shortfall because the program spends more than it takes in. In 2024, the OASI Trust Fund cost $1,327 billion to administer, but income totaled only $1,224 billion, a shortfall of $103 billion. The notion that Social Security faces a shortfall suffuses the national conversation about preparing for retirement. Older Americans wonder if their monthly checks will go down midway through their golden years. Younger Americans have doubled down on retirement savings, partly out of fear that Social Security won't fully support them.
