By Cyril Tuohy
The combined assets of the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust funds will be depleted in 2033, and the Medicare Trust Fund is expected to be empty by 2026, two years later than projected last year due to lower expenditures from the Hospital Insurance Trust Fund, the government reported.
In its annual report to Congress, the Social Security Board of Trustees said that the assets in the OASI and DI trust funds will continue to grow until 2020. But in 2021, the cost of the program will exceed income raised from taxes, and reserves eventually will run dry by 2033.
In 2033, there will be enough money coming in from payroll taxes to pay only 77 percent of scheduled benefits, the trustees said. Total expenditures from the combined OAS and DI trust funds came to $786 billion last year.
“The Social Security Trust Funds’ projected depletion dates have not changed, and three fourths of benefits would still be payable after depletion,” said Carolyn W. Colvin, acting Social Security Commissioner, said in a news release. “But the fact remains that Congress needs to act to ensure the long-term solvency of this vital program.”
In a separate report, the Medicare trustees urged Congress to act now to slow the projected growth rates of expenditures of the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund.
The sooner reforms are passed, the Medicare trustees said, the more flexibility, the more gradual and the less painful the necessary changes will be in the future. Medicare covered 50.7 million people, and total expenditures were $574 billion in 2012.
Reports outlining the projected depletion of the Social Security and Medicare trust funds are not new, but have taken on a new urgency in the wake of dozens of surveys showing that many Americans feel unprepared for retirement.
Social Security, which was designed only to supplement retirement income, is turning into a primary retirement income stream for many Americans as corporations continue to cut back on pensions and workers are left to invest for themselves through defined contribution plans.
Growth in the spending of Medicare, which already serves as the primary health insurer for many Americans, takes a larger portion of the nation’s resources every year as health costs rise and the leading edge of the baby boom begins to retire.
“With Social Security and Medicare forming the base of almost every American’s retirement plan, the programs’ long-term fiscal challenges, as have been reported annually by their trustees for some time, compound the uncertainty and further diminish retirement confidence,” Cathy Weatherford, president of the Insured Retirement Institute, said.
The “one certainty” stemming from the reports is that both programs will require changes if they are to remain viable and the changes may mean lower benefits from the entitlement programs, Weatherford also said.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].
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