High energy prices and an economy that has been slow to rebound are worsening Social Security’s finances, shortening the life of the trust funds that support the program by three years, according to a recently released report.
Those trust funds will now run dry in 2033, according to a report issued by the trustees that oversee the massive retirement and disability program.
Medicare’s hospital insurance fund is projected to run out of money in 2024, which is unchanged from last year. The trustees, however, said Medicare spending continues to rise.
Congress enacted a 2 percent cut in Medicare last year, which is the main reason the trust fund exhaustion date did not advance.
If the Social Security and Medicare funds ever become exhausted, the nation’s two biggest benefit programs would collect only enough money in payroll taxes to pay partial benefits.
The trustees said in their annual report that Congress should address the programs as soon as possible, but no action is likely before the November election.
Social Security’s finances worsened in part because high energy prices suppressed wages, a trend the trustees see as continuing. The trustees said they expect workers to work fewer hours than previously projected, even after the economy recovers.
This year’s cost-of-living-adjustment, or COLA, was also higher than expected. That was good news for seniors, who saw their benefits increase by 3.6 percent, but it drained more resources from Social Security. The trustees project a 1.8 percent COLA for next year, though the actual amount won’t be set until October.
The trustees also warned that their own Medicare projections could be too rosy. Based on current law, they assume cuts in payments to doctors that Congress routinely waives will actually take place. They also assume President Barack Obama’s health care law will squeeze the full amount of its $500 billion cuts from the program.
More than 56 million retirees, disabled workers, spouses and children receive Social Security. The average retirement benefit is $1,232 a month. About 50 million people are covered by Medicare, the medical insurance program for older Americans.
Source: AP, LifeHealthPro.com