The Treasury Department announced Tuesday that Social Security trusts holding retirement money for millions of Americans might be depleted sooner than expected, and trustees are partially blaming the coronavirus pandemic.
“Today, the U.S. Department of the Treasury along with the U.S. Department of Health and Human Services, U.S. Department of Labor, Centers for Medicare and Medicaid Services, and Social Security Administration released the annual Social Security and Medicare Trustees Reports following a closed meeting of the Social Security and Medicare Boards of Trustees,” the Treasury Department said in a news release.
In a summary of 2021 reports, the Social Security Administration announced that the Old-Age and Survivors Insurance Trust Fund will run out of money a year earlier than was calculated just last summer.
“The Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivors benefits, will be able to pay scheduled benefits on a timely basis until 2033, one year earlier than reported last year. At that time, the fund’s reserves will become depleted and continuing tax income will be sufficient to pay 76 percent of scheduled benefits,” the agency said.
The OASI fund pays retired workers, along with spouses and children of people who were eligible for benefits but have passed away. Current projections have eligible beneficiaries out of luck within 12 years.
Additionally, the Disability Insurance Trust Fund will be depleted more quickly than was projected during the last estimate in 2020, the SSA warned.
“The Disability Insurance (DI) Trust Fund, which pays disability benefits, will be able to pay scheduled benefits until 2057, 8 years earlier than in last year’s report. At that time, the fund’s reserves will become depleted and continuing tax income will be sufficient to pay 91 percent of scheduled benefits,” the agency said.
“In 2020, Social Security’s trust fund reserves were $2.9 trillion at the year’s end, having increased by $11 billion.”
“The total annual cost of the program is projected to exceed total annual income, for the first time since 1982, in 2021 and remain higher throughout the 75-year projection period,” an FAQ page on the agency’s website noted.
Asset reserves are forecast to decline during this year while the cost of benefits has exceeded incoming cash and interest for the programs for more than a decade now.
SSA has not seen a balance between replenished funds and interest payments versus outgoing payments since 2010.
Trustees warned that action is needed from Congress to keep the programs afloat beyond projected shortfalls, according to acting Social Security Administration Commissioner Kilolo Kijakazi.
“The Trustees’ projections in this year’s report include the best estimates of the effects of the COVID-19 pandemic on the Social Security program,” Kijakazi said in a statement.
“The pandemic and its economic impact have had an effect on Social Security’s Trust Funds, and the future course of the pandemic is still uncertain.”
“Yet, Social Security will continue to play a critical role in the lives of 65 million beneficiaries and 176 million workers and their families during 2021,” Kijakazi added.
According to GOBankingRates, roughly 65 million beneficiaries received benefits totaling $1.096 trillion during the 2020 calendar year. The SSA said that it cost an additional $6.3 billion for it to run its programs during that same period of time.
“The finances of both programs have been significantly affected by the pandemic and the recession of 2020,” the Treasury Department said Tuesday.
Treasury Secretary Janet Yellen, a trustee board member, also commented on the alarming report on Tuesday.
“Having strong Social Security and Medicare programs is essential in order to ensure a secure retirement for all Americans, especially for our most vulnerable populations,” Yellen said, CNBC reported.
“The Biden-Harris Administration is committed to safeguarding these programs and ensuring they continue to deliver economic security and health care to older Americans.”
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