The timeline to replenish Social Security is being extended. The federal retirement program said Monday it may not need to cut benefits until 2035, one year later than previously forecast, because of stronger performance by the U.S.
The new projection, from the Social Security Board of Trustees' amounts to "good news" for the program's 70 million beneficiaries, said Martin O'Malley, Commissioner of Social Security, in a statement. Even so, he urged Congress to take steps to shore up the program to ensure it can pay full benefits "into the foreseeable future."
Social Security relies on its trust funds to provide monthly checks to beneficiaries, with the funds primarily financed through the payroll taxes that workers and businesses provide with each paycheck. But the funds' reserves are drawing down because spending is outpacing income, partly due to the wave of baby boomer retirements and an aging U.S. population.
Experts underscore that if the trust funds are depleted, benefits won't suddenly disappear. Instead, Social Security beneficiaries will face a cut to their monthly checks, with the agency on Monday projecting that recipients would lose 17% of their current benefits.
That would be painful for millions of retired and disabled Americans, but it represents a modest improvement from last year, when the Social Security Administration projected that benefits could be slashed by 23% if the trust funds reached the point of depletion.
Advocates for older Americans praised the improved outlook, while pressing Congress to take action on shoring up the program.
"Congress owes it to the American people to reach a bipartisan solution, ensuring people's hard-earned Social Security benefits will be there in full for the decades ahead," AARP CEO Jo Ann Jenkins said in a statement. "The stakes are simply too high to do nothing."
Economic boost
O'Malley attributed the improved Social Security forecast to the stronger economy, pointing to what he called "impressive wage growth, historic job creation, and a steady, low unemployment rate." In other words, a healthy job market is resulting in more Social Security taxes going into the funds' coffers.
The report comes as Social Security's financial outlook has become a political lightning rod, with Republicans proposing that the retirement age be raised — effectively cutting benefits for millions of current workers — and former President Donald Trump indicating he would be open to cuts to Social Security and Medicare.
Democrats argue that there are other ways to fix the program without cutting benefits, such as raising the cap on payroll taxes. Currently, individual income over $168,600 is exempt from the Social Security payroll tax.
Medicare's Financial Outlook
When the fund's reserves are depleted, Medicare will only be able to cover 89% of the costs for patients' hospital visits, hospice care, nursing home stays, or home health care following hospital visits.
President Joe Biden attributed the stronger outlook for Social Security and Medicare to his administration's economic policies in a statement released on Monday.
