EDITOR NOTE: We are getting closer to the end of the Social Security trust fund, and not just because of the passage of time. Due to the pandemic and resulting recession, the Social Security trust will now run out in 12 years, one year sooner than anticipated. By 2033, Social Security, the biggest and most successful safety net program in U.S. history, will be done. If the Treasury Department raids the Disability Insurance Trust Fund, it can keep Social Security going until 2034. The most frustrating part is, as the long-time “third-rail of politics,” no politician has the gall to step up and try and fix this mess. The bottom line is unless you are already retired, it is now fully on you to figure out how and when you'll be able to working. For many, this means buying assets that historically hold value, like non-CUSIP gold and silver, to create a true retirement nest egg.
The Social Security trust fund most Americans rely on for their retirement will run out of money in 12 years, one year sooner than expected, according to an annual government report published Tuesday.
The outlook, aggravated by the Covid pandemic, also threatens to shrink retirement payments and increase health-care costs for older Americans.
Officials said that the Old-Age and Survivors trust fund is now able to pay scheduled benefits until 2033, one year earlier than reported last year. The Disability Insurance fund is estimated to be adequately funded through 2057, eight years earlier than in the report published in 2020.
Though the two funds are separate under law, the Treasury Department said the hypothetical combined funds would be able to pay scheduled benefits on a timely basis until 2034.
Senior administration officials said in a press briefing Tuesday afternoon that a spike in deaths among retirement-age Americans in 2020 helped keep the programs’ costs lower than projected. They added that the ultimate, long-term impact of the coronavirus is less clear as costs and revenues return to their extended forecasts.
The Treasury Department said it estimates the level of worker productivity and thus GDP is assumed to be permanently lowered by 1% even as they are projected to resume their pre-pandemic trajectories.
Nevertheless, the financial outlook for Social Security and Medicare, two of the nation’s preeminent safety net programs, has deteriorated over the past year as Covid hastened retirements and caused a contraction in the size of the U.S. labor force.
There was no change from last year’s projection that the Medicare’s hospital insurance fund would be depleted in 2026. At that point, doctors, hospitals and nursing homes would not receive their full compensation from Medicare and patients would likely bear the responsibility for any cuts to coverage.
“The finances of both programs have been significantly affected by the pandemic and the recession of 2020,” the Treasury Department said in materials released Tuesday. The combined effects of a dive in employment, interest rates, earnings and GDP, as well as higher mortality for the next few years “all significantly impact the outlook of the programs.”
In their entirety, the funds act as pillars upholding the retirement plans of tens of millions of Americans, current and future. Americans have for decades come to assume that the programs they spent years contributing to in payroll taxes would in turn provide for them.
The programs have become so popular that they are often dubbed the “third rail” of U.S. politics — simply too dangerous to touch. Treasury Secretary Janet Yellen struck that tone in a statement released Tuesday.
“Having strong Social Security and Medicare programs is essential in order to ensure a secure retirement for all Americans, especially for our most vulnerable populations,” she said. “The Biden-Harris Administration is committed to safeguarding these programs and ensuring they continue to deliver economic security and health care to older Americans.”
Originally posted on CNBC