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The Social Security Trust Fund is expected to run short of cash by 2033, according to new estimates, which could reduce benefits to the millions of Americans who depend on the program.
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Kevin Deitch/Getty Images
The Social Security Trust Fund is expected to run short of cash by 2033, according to new estimates, which could reduce benefits to the millions of Americans who depend on the program.
Kevin Deitch/Getty Images
The Social Security program is expected to run out of cash to pay promised benefits in about a decade, according to new projections released by the trustees of both programs on Friday, and Medicare’s main trust fund will run out of money by 2031. We expect to run out of funds.
Forecasts are a yearly reminder that popular programs are built on precarious financial bases. Attempts to patch them will undoubtedly face stiff political opposition, but doing nothing can be even worse.
Social security benefits, such as retirees, are primarily paid through current workers’ payroll taxes, supplemented by trust funds.
Benefits paid by the program will exceed income from 2021 onwards, and trust funds are now expected to be exhausted by 2033. That’s a year ahead of last year’s forecast, thanks in part to slower economic growth.
Unless changes are made to strengthen the program by then, benefits for 66 million social security beneficiaries will be cut by 23-25%.
Meanwhile, the Medicare Trust Fund, which helps pay for hospitals and nursing homes, is also short of cash. Health care provider salaries could be cut by 11% unless changes are made by 2031. That deadline is three years later than last year’s forecast.
Thanks to the switch to cheaper outpatient care, and because some people who needed the most costly treatment died prematurely during the pandemic, the Board expects some savings in Medicare costs. I’m here.
Millions of people depend on Social Security and Medicare
Treasury Secretary Janet Yellen, who will lead the trustees, stressed the importance of supporting both trust funds to avoid drastic cuts in benefits and payments to health care providers.
“Social Security and Medicare are the two basic programs that older Americans rely on for security in their retirement years,” Yellen said in a statement. We are committed to ensuring the long-term viability of these important programs so that we can receive the benefits we earn.”
President Biden speaks at an event discussing Social Security and Medicare at the University of Tampa in Tampa, Florida, February 9, 2023. The Medicare Trust Fund, which helps pay for hospitals and nursing homes, is short on cash.
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President Biden speaks at an event discussing Social Security and Medicare at the University of Tampa in Tampa, Florida, February 9, 2023. The Medicare Trust Fund, which helps pay for hospitals and nursing homes, is short on cash.
Joe Raedle/Getty Images
As part of the budget, the Biden administration proposed extending the life of the Medicare Trust Fund by 25 years, primarily through higher taxes on wealthy individuals. The administration has not proposed a similar amendment to Social Security.
A major challenge for social security is demographics. As baby boomers retire, fewer workers will pay into the program to support the cost of increasing benefits. As of last year, he had only 2.7 workers paying into the system for every person receiving social security benefits.
In addition, a smaller percentage of income is subject to the payroll tax that supports Social Security.
Patching the program would require higher taxes, lower benefits, or a combination of both.
Maya McGuineas, chairman of the Responsible Federal Budget Committee, said, “The only thing we are responsible for is acknowledging that we have to make changes, and there is no consensus on how to do that. No, but let’s sit down and try to understand them.” “If you wait until the last minute, they’re going to have a lot more trouble.”
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