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Social Security trust fund to run out in 2034, a year earlier than thought
The Social Security trust fund is on track to run out of money in nine years, its trustees said in a new report Wednesday, a year sooner than the last projection.
Why it matters: The U.S. faces a major fiscal reckoning in the early 2030s, as retirement benefits would be on track to be slashed automatically, if Congress does not act to preserve the benefits on which millions of Americans rely.
A law enacted at the start of this year expanding Social Security for railroad and public pension recipients was the main reason for the quicker drawdown.
By the numbers: The new Social Security and Medicare Trustees report, the government's formal annual estimate of the programs' finances, finds that the trust fund for the Social Security retirement program is set to go bust in 2033, the same as last year.
At that time, its incoming tax revenues would be enough to pay only 77% of scheduled benefits, barring a change by Congress.
Combining the old-age and disability programs would buy future Congresses another year, with the combined programs able to pay 81% of scheduled benefits starting in 2034 — not 2035, as estimated a year ago.
State of play: The trustees attributed the earlier shortfall in large part to the Social Security Fairness Act, passed by large bipartisan majorities and signed by former President Biden on Jan. 5.
The trustees also cut their estimates of fertility rates and adjusted their estimate of the long-term share of GDP paid as wages.
Of note: Medicare's hospital insurance trust fund is also scheduled to run out in 2033, three years earlier than reported last year, and would then only be able to pay 89% of benefits absent changes.
Speaking with reporters Wednesday, a government official said Wednesday that hospital usage surged in 2024 after lower rates in the immediate aftermath of the pandemic.
"Was that foregone services from the COVID-related experience… or is there some broader change in terms of how health care is being dispensed?" the official said. "Obviously something we will continue to monitor."
