The Social Security program is expected to run dry within a decade as a result of slower economic growth — and today's youngest retirees could be among the first in the nation to see benefit cuts.
New findings from the Social Security and Medicare Trustees report show the entitlement program faces insolvency as soon as 2033, a year earlier than previously projected. The acceleration toward insolvency is largely the result of a 3% downward revision of gross domestic product and labor productivity over the next decade.
Unless major changes are made before 2034 to shore up the trust fund, more than 66 million Americans would see a benefit reduction between about 23% to 25%, the report showed.
"The combined trust funds will be insolvent by 2034, when today’s 56-year-olds reach the full retirement age and today’s youngest retirees turn 73," the Committee for a Responsible Federal Budget (CRFB) said in a recent analysis. "Upon insolvency, all beneficiaries will face a 20 percent across-the-board benefit cut."
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Over the next 75 years, the benefit cuts will become more severe: Social Security recipients will face a 26% across-the-board cut, according to the CRFB.
"The Social Security program is only 11 years from insolvency, with insolvency of the old-age program only a decade away," the group said. "Action must be taken soon to prevent an across-the-board benefit cut for many current and future beneficiaries."
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Social Security at risk of insolvency by 2030
Payroll taxes and other funding sources for the government program are being impacted by the COVID-19 pandemic.
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Treasury Secretary Janet Yellen, who leads the Social Security and Medicare trustees, emphasized the need to bolster both the Medicare and Social Security funds in a statement on Friday.
"Social Security and Medicare are two bedrock programs that older American rely upon for their retirement security," she said in a statement. "The Biden-Harris Administration is committed to ensuring the long-term viability of these critical programs so that retirees can receive the hard-earned benefits they’re owed."
The future of the program has emerged as a contentious issue between Republicans and Democrats, after President Biden accused GOP lawmakers of wanting to slash funding for Medicare and Social Security during his State of the Union Address.
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How are Social Security cost of living adjustments (COLA) calculated?
The adjustments are based on data relating to inflation.
Republicans have repeatedly pushed back on that assertion, insisting they do not want to cut funding for either of the entitlement programs.
Biden proposed raising Medicare taxes from 3.8% to 5% on annual income above $400,000 in his budget proposal earlier this month. He also floated closing a loophole used by business owners and higher-earners to shield some of their income from additional taxes.
The White House estimated the floated changes would extend the Medicare trust fund by an additional 25 years, "beyond 2050."
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The proposals are unlikely to garner much support in a deeply divided Congress, and face almost certain rejection from Republicans who won control of the House last year.
The president did not address the looming Social Security insolvency in his budget.
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