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Social Security Will Go Bankrupt in 2035, One Year Later Than Prior Projections

A new report shows that the Social Security system’s main trust fund will be depleted by 2035—one year later than a prior estimate, though concerns remain about the fund’s solvency.

The Social Security Board of Trustees released its annual report on May 6 that projects that the Social Security trust fund, which consists of the combined asset reserves of the federal Old-Age and Survivors Insurance and Disability Insurance (OASI and DI) Trust Funds, will become “depleted” in 2035.

At the point that the combined fund runs dry, Social Security will only be able to pay out 83 percent of scheduled benefits.

In a fact sheet, the Treasury Department said that the improvement in the long-term finances of the Social Security fund was mostly due to an upward revision to labor productivity over the projection period based on stronger economic growth, combined with a lower assumed rate of workers going on long-term disability.

Martin O’Malley, commissioner of Social Security, said in a statement that the projected one-year delay in the fund’s go-broke date is good news for the millions of Americans who depend on Social Security. Still, he warned that the threat of the shortfall continues to loom large unless Congress takes action to extend the health of the fund.

“Eliminating the shortfall will bring peace of mind to Social Security’s 70 million-plus beneficiaries, the 180 million workers and their families who contribute to Social Security, and the entire nation,” he said.

Congress could eliminate the shortfall by increasing revenue, reducing benefits, or some combination of the two.

A Republican task force recently proposed a solution that involves raising the retirement age to account for increases in life expectancy while reducing auxiliary benefits for high-income earners.

Last year’s annual report from the Social Security Board of Trustees projected that the Social Security trust fund would run dry by 2034. The estimates are subject to revision in each annual report based on the way the economy is performing and how much people pay into Social Security.

The latest report also revealed a five-year pushback in Medicare’s go-broke date for its hospital insurance trust fund. Thanks in part to higher payroll tax income and lower-than-projected expenses from last year, the insolvency date of the Medicare Hospital Insurance Trust Fund has been pushed back to 2036.

President Joe Biden issued a statement on May 6 in response to the report, proposing to raise taxes on wealthier Americans to extend the fund’s solvency.

“I am committed to extending Social Security solvency by asking the highest-income Americans to pay their fair share without cutting benefits or privatizing Social Security,” the president said.

What’s the Fix?

Democrats have proposed bolstering the fund’s finances by asking wealthier Americans to pay more in payroll taxes, with the Social Security tax currently capped at 6.2 percent of the first $168,600 of employee wages.

Read Full Articles: Social Security Will Go Bankrupt in 2035, One Year Later Than Prior Projections

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