The Social Security trust fund for retirees will cease paying full benefits beginning in 2033. That’s one year sooner than estimated last year, its trustees said on Tuesday.
The adjusted projection is due to the COVID-19 pandemic’s effect on the federal program’s finances, Market Watch reports.
Meanwhile, Medicare’s hospital insurance fund will run dry in 2026, according to the annual trustees’ report. The Disability Insurance Trust Fund will run out in 2057. That’s 8 years sooner than predicted last year.
Pandemic Has Affected Social Security Trust Funds
Administration officials said the trust funds have taken a hit from the pandemic’s economic toll. The pandemic-induced recession cut employment levels and ate into payroll tax revenue. And that sped up the depletion of Social Security’s reserves.
“The pandemic and its economic impact have had an effect on Social Security’s Trust Funds,” the Social Security Administration’s acting commissioner, Kilolo Kijakazi, said in a statement. “And the future course of the pandemic is still uncertain.”
Kijakazi added, “Social Security will continue to play a critical role in the lives of 65 million beneficiaries and 176 million workers and their families during 2021.”
Officials noted that their new projections did take into account other COVID-related factors. For example, declines in birth rates, upticks in death rates and declines in immigration.
The funds’ trustees have for years urged political leaders to heed their warnings about Social Security, but lawmakers have been reluctant to make any of the changes necessary to shore up the funds.
U.S. Faces a Retirement Crisis
The extension of Americans’ life spans has not translated to an equally delayed retirement age, according to Market Watch. Life expectancy is now roughly 20 years longer than it was in 1930. (The Social Security Act was signed into law in 1935.) Meanwhile, the official retirement age has only budged from 65 to around 67.
Moreover, many American adults are getting by with little savings. Fully 20% of U.S. adults have no savings, and less than 40% can pay an unanticipated expense of $1,000. It’s clear that many older adults haven’t budgeted for a future in which Social Security runs dry.
It’s equally clear that Social Security can’t bear the weight of the Baby Boomer generation retiring at the same age as their parents, even as their life expectancy has grown. Among the possible solutions are raising taxes to pay for more Social Security or encouraging seniors to get out into the workforce and put their experience to good use.
But whatever society decides to do, it’s clear from the trustees’ report today that something will have to be done earlier than previously projected. And while lawmakers in Washington have yet to find the political will to address the problem, it is a ticking time bomb that they will have to defuse sooner or later.