“Social Security and Medicare are more crucial than ever for older Americans. Social Security is the only guaranteed source of retirement income, and Medicare provides the essential health coverage that seniors rely on and need, ”said AARP CEO Jo Ann Jenkins . “Reports from today’s directors show that both programs are strong, but there are longer-term funding challenges to overcome. Any discussion of the benefits earned by Americans requires public input and full and open debate. “
Partial benefits would be paid after the trusts are exhausted
If no changes are made before the projected shortfall in 2034, Social Security would not have enough funds to pay full benefits to retirees. This would mean that recipients at that time would only receive 78 cents for every dollar they were expected to receive. More than 65 million Americans currently receive Social Security benefits.
There are in fact two separate social security trust funds: the Old Age and Survivors Insurance Trust Fund (AVS) and the Disability Insurance Trust Fund (AI). When examined separately (rather than the combined analysis used to predict the date of 2034), the AVS trust fund, which pays retirement and survivor benefits, is expected to run out in 2033, a year earlier than in the 2020 report. After 2033, it would be able to pay 76% of planned benefits with continued tax income.
The IA trust fund is expected to run out in 2057, eight years earlier than last year’s report, with 91% of benefits remaining payable thereafter.
Medicare trust funds are maintained
A separate report from Medicare administrators found that the trust fund that helps cover about 61.2 million Medicare Part A beneficiaries would be cash-strapped in 2026, the same date predicted by last year’s report. Medicare’s Part A Hospital Insurance (HI) trust fund, which pays for inpatient expenses, is still expected to be able to pay 91% of its planned benefits if its trust fund runs out of money in 2026.
“Lawmakers have many policy options that would reduce or eliminate long-term funding gaps for Social Security and Medicare,” the administrators wrote in their 2021 report released on August 31. “Lawmakers should address these financial challenges as soon as possible. Acting as early as possible will allow for a wider range of solutions to be considered and allow more time to gradually introduce changes so that the public has enough time to prepare.
The Supplemental Medical Insurance (SMI) Trust Fund for Part B of Medicare, which pays for medical and outpatient services, and Part D, which covers prescription drug benefits, is solvent indefinitely, with funding from revenue general and beneficiaries’ bonuses.
“The solvency of Medicare trust funds is an extremely important and long-standing issue, and we are committed to working with Congress to continue to build a vibrant, equitable and sustainable Medicare program,” said Chiquita Brooks-LaSure, administrator of the Centers for Medicare and Medicaid Services.