The financial health of Social Security improved slightly over the past year, though the program’s trust fund remains on track to be depleted by the mid-2030s, according to the annual trustee report released Thursday.
The report projects that the program’s combined reserves will be depleted by 2035, one year later than was projected last August. A key Medicare fund also had an improved outlook, with a two-year solvency extension.
The projection for Social Security is in keeping with what officials had forecast pre-pandemic, despite worries about whether those calculations could be upended by the economic disruption wrought by the coronavirus.
TREND CONTINUES: As last year’s report anticipated, the amount of benefits paid out in 2021 exceeded the amount of money it took in. That trend is expected to continue, according to Thursday’s report.
Social Security is composed of two components: one for retirees, children and widows; and the other for those claiming disability insurance benefits.
The retirement program — which dwarfs the one for disabled individuals — is projected to be able to pay full benefits on a timely basis until 2034, a year longer than the last report. After that, the program would pay a reduced amount of a little more than three-quarters of scheduled benefits unless Congress intervenes.
Disability fund brighter: By contrast, the disability insurance trust fund continues to be on surer footing. The 2020 analysis projected it to run out in 2049, before being bumped up to 2057 in the report issued in 2021. Thursday’s report states that the fund is expected to be able to meet its financial obligations beyond the 75-year projection window — a first since the early 1980s, according to administration officials.
Federal officials note that uncertainty tied to the Covid-19 pandemic continues to cloud prognostications, but the report states that officials “currently assume that the pandemic will have no net effect on our long-range projections.”
Medicare improves as well: The fund that covers hospital care through Medicare, better known as Part A, is projected to remain solvent until 2028. The program’s previous insolvency projection was 2026.
What’s next: The costs of Social Security and Medicare are projected to continue rising substantially relative to the broader economy in the coming decades, as more baby boomers transition to retirement and raise the number of beneficiaries, while a lower birth rate drags down employment and economic growth.
Administration officials also said they anticipate that inflation will lead to a noticeable boost to benefits in the form of a roughly 8 percent cost-of-living increase, though that figure has not been finalized.