Topline
Two major financial safety nets for older Americans will run dry in the next decade, as Social Security and Medicare face increasingly dire financial outlooks, a new report says.
Social Security and Medicare funds are expected to be depleted within the decade.
Key Facts
Funds for Social Security and the Medicare trust fund that pays for hospital expenses are expected to be depleted by 2033 and 2031 respectively, according to the annual Social Security and Medicare Trustees report released on Friday by the Department of Treasury.
Social Security is predicted to run out a year earlier than was forecasted in the report last year, after growth and productivity projections fell this year.
The estimate for Medicare was actually extended compared with last year’s estimate of a 2028 depletion date, due to decreased healthcare spending since the pandemic.
After those years, Social Security will only have enough funds to pay about 77% of total scheduled benefits, and Medicare will be able to pay 89%, threatening to leave a portion of older Americans with limited healthcare coverage in their retirement years, according to the report.
Key Background
The report comes after the Congressional Budget Office released its own report in February saying it “foresees more dramatic fiscal deterioration than previously thought.” The worsening financial outlook for Social Security is primarily due to a 3% reduction in GDP estimates this year, which is partly caused by record rates of inflation, the report said. On top of that, America’s population is aging, with its workforce estimated to shrink and its older demographic growing as Baby Boomers retire at a rapid rate, so there will be fewer workers to support retirees, putting a strain on Social Security funding. In 2021, Social Security did not operate on a surplus of funding as a result of these factors, the first time that happened in 40 years.
What To Look For
It’s up to lawmakers now to make changes to reduce financial shortfalls, the organization said in its report, voicing support for the Biden Administration’s Medicare proposal, which allots enough funding to extend Medicare for at least 25 more years. It’s also likely “very substantial cuts” will be necessary for the federal budget, JPMorgan analysts including Joyce Chang wrote in a Friday note to clients. To restore a budget balance by 2033, the government would have to cut up to 57% of non-interest expenses in order to keep Social Security and Medicare at their full, current capacities.
Big Number
67 million. That’s how many Americans receive social security benefits every month in 2023, according to the Social Security Administration.
Source: https://www.forbes.com/sites/katherinehamilton/2023/03/31/social-security-estimated-to-fall-short-by-2033-earlier-than-previously-projected/