This week’s release of the annual trustees reports for the US Social Security and Medicare trust funds indicated that the federal Old-Age and Survivors Insurance (OASI) Trust Fund is projected to reach insolvency by 2033, at which point benefits would need to be cut by 21%.
However, a recent report from the US Department of the Treasury suggested that the need for cuts to Social Security benefits may be delayed until 2035, a year later than previously estimated.
The trustees stated that by 2035, the funding for the federal Social Security Trust Fund would begin to be depleted, and unless Congress takes action to support the program, benefits for seniors are expected to be reduced by 17%. Factors such as wage growth and low unemployment rates are seen as reasons for the fund gaining an extra year of solvency.
It’s worth noting that the above data combines the Old-Age and Survivors Insurance Trust Fund (which pays out Social Security benefits) and the Disability Insurance (DI) Trust Fund in its calculations. The combined projection is often used to illustrate the overall status of the Social Security program. In isolation, the OASI Trust Fund alone is expected to be depleted by 2033.
Treasury Secretary Janet L. Yellen emphasized the importance of Social Security and Medicare in a public statement, saying, “Social Security and Medicare are critical programs that provide security for retirees and their families. The Biden-Harris administration will continue to oppose cuts to these programs. We are committed to taking measures to protect and strengthen these programs that so many Americans rely on for their retirement security.”
In an open letter to Vice President Harris and House Speaker Johnson, the Federal OASI and DI Trust Funds Board highlighted that after 2033, the reserves for the retirement benefit trust fund would quickly be exhausted, potentially leading to only about 79% of benefits being paid out if no legislative action is taken.
The trustees urged lawmakers to enact legislation promptly to make necessary adjustments to the OASI program.
Social Security Administration (SSA) Commissioner Martin O’Malley urged both parties in Congress to take action to sustain the financial health of the trust funds, addressing funding shortfalls and providing peace of mind to the more than 70 million beneficiaries of Social Security, the 180 million taxpayers contributing to the program, their families, and the nation as a whole.
Following the release of the report, Representative David Schweikert, Vice Chair of the Congress Joint Economic Committee and a Republican from Arizona, warned that current Social Security beneficiaries are facing the risk of benefit cuts and urged both parties to work together on finding a solution.