Social Security Funds are expected to dry up by 2033. The Social Security Board of Trustees annual report paints a bleak picture. As you know, the benefits receive most of its funding through payroll taxes on current workers and supplements from a trust fund.
According to NPR, benefits paid out by the program have exceeded the money coming in since 2021. Now, the trust fund supplementing the payroll taxes is expected to be depleted by 2033.
What about beneficiaries who rely on Social Security Funds?
Those who rely on Social Security funds could see those benefits cut up to 25 percent. Many retirees also rely on Medicare for healthcare. The Medicare trust fund is also in trouble, according to reports. Hospitals and nursing homes rely on supplemental payments from the fund. They face an 11% cut if changes don’t happen by 2031. Treasury Secretary Janet Yellen urges the importance of funding both trusts to avoid cuts to benefits and healthcare providers.
Social Security and Medicare are two bedrock programs that older Americans rely upon for their retirement security.”
Janet Yellen – Treasury Secretary
Yellen also says, “The Biden-Harris Administration is committed to ensuring the long-term viability of these critical programs so that retirees can receive the hard-earned benefits they’re owed.”
President Biden’s 2024 Budget proposes an extension of the Medicare Trust Fund for another 25 years. This proposal largely hinges on higher taxes for wealthy individuals. The administration has not proposed a similar fix for Social Security funds.
The NPR report notes the primary challenge in funding Social Security is demographics. As baby boomers retire, fewer workers are paying into the program to support rising costs. In 2022, only 2.7 workers paid into the system for each person drawing social security benefits. NPR notes a fix for the programs likely includes higher taxes, lower benefits, or a combination of the two.
Maya Macguineas, president of the Committee for a Responsible Federal Budget, spoke to NPR about the depletion of Social Security funds. She says “The only responsible thing to do is admit that we’ve got to make changes, and we disagree about how to do it but let’s sit down and try to figure those out.”