By John McClaughry
The Social Security pension system is currently projected to pay benefits that exceed its income in 2021 for the first time in nearly 40 years. The fund will stay solvent until 2035 by paying out its accumulated reserves. Then there will be an automatic 24% reduction in benefits unless Congress steps in to shore up the program. But officials said the depletion date could be earlier than 2035 if employment levels, and thus payroll tax revenues, suffer a significant or sustained drop from the pandemic.
The only good news is that the disability fund will run out in 2065, 13 years later than projected in last year’s report, due to a continued decline in new disabled-worker applications and lower-than-expected disability incidence rates.
Taken together, the two programs would only be able to pay 79% of scheduled benefits after the trust funds are depleted in 2035.
A new analysis from the Bipartisan Policy Center, a centrist Washington think tank, suggested that the economic fallout from the pandemic — if similar to the 2007-09 recession — could deplete the retirement program’s trust fund by about 2028, and deplete the disability program by about 2024.
The report also said Medicare’s hospital insurance fund would be depleted in 2026, unchanged from last year’s report, as program costs continue to exceed the trust fund’s income. But it noted that depletion could occur as early as 2023 in an adverse scenario of lower-than-expected revenues and higher-than-expected costs.
This news will surely make everyone over 50 nervous — on top of the pandemic.
John McClaughry is vice president of the Ethan Allen Institute. Reprinted with permission from the Ethan Allen Institute Blog.