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Social Security Costs to Exceed Income in 2020
By Kate Davidson | April 22, 2019
WASHINGTON—The Social Security program’s costs will exceed its income in 2020 for the first time since 1982—two years later than officials projected last year—forcing the program to dip into its nearly $3 trillion trust fund to cover benefits.
But by 2035, those reserves will be depleted and Social Security will no longer be able to pay its full scheduled benefits, according to the latest annual report by the trustees of Social Security and Medicare released Monday.
“Both Social Security and Medicare face long-term financing shortfalls under currently scheduled benefits and financing,” the trustees wrote, urging lawmakers to take action sooner rather than later to give policy makers enough time to phase in changes and shore up the programs.
Social Security consists of two programs, one for retirees and one for people who claim disability benefits. Taken separately, the retirement program will be able to pay full benefits on a timely basis until 2034, unchanged from last year’s report.
The disability fund is now expected to run out in 2052, 20 years later than projected in last year’s report, due to a continued decline in new disabled-worker applications and lower-than-expected disability incidence rates, the trustees wrote.
The report also said Medicare’s hospital insurance fund would be depleted in 2026, unchanged from last year’s report, as lower payroll taxes and reduced income from the taxation of Social Security benefits weighed on the trust fund’s income. The trust fund’s costs, meanwhile, are expected to be slightly higher than last year due to higher spending and higher projected provider payment updates.
The costs of both programs are projected to rise substantially as a share of the economy over the next 16 years, as a wave of retiring baby boomers boosts the number of beneficiaries, and lower birthrates over the past few decades weigh on employment growth and economic output.
As a share of gross domestic product, Social Security’s annual cost is expected to increase from 4.9% in 2019 to about 5.9% by 2039, while Medicare costs are projected to rise from 3.7% of GDP to 5.7% by 2035.
In 2019, the combined cost of the Social Security and Medicare programs are estimated to equal 8.7% of GDP, before rising to 11.6% by 2035. Most of the increase is attributable to Medicare, the trustees wrote. While annual Medicare costs are currently about 76% of the cost of Social Security, the program is expected to become more expensive by 2040, even as health care costs have fallen over the past decade.
“Notwithstanding the assumption of a substantial slowdown of per capita health expenditure growth, the projections indicate that Medicare still faces a substantial financial shortfall that will need to be addressed with further legislation,” the trustees said.
https://www.wsj.com/articles/social...jTvyfKFbLAKVIq24g1wSrmVcNoppRLtOpYIIcRdYL1DJ4
By Kate Davidson | April 22, 2019
WASHINGTON—The Social Security program’s costs will exceed its income in 2020 for the first time since 1982—two years later than officials projected last year—forcing the program to dip into its nearly $3 trillion trust fund to cover benefits.
But by 2035, those reserves will be depleted and Social Security will no longer be able to pay its full scheduled benefits, according to the latest annual report by the trustees of Social Security and Medicare released Monday.
“Both Social Security and Medicare face long-term financing shortfalls under currently scheduled benefits and financing,” the trustees wrote, urging lawmakers to take action sooner rather than later to give policy makers enough time to phase in changes and shore up the programs.
Social Security consists of two programs, one for retirees and one for people who claim disability benefits. Taken separately, the retirement program will be able to pay full benefits on a timely basis until 2034, unchanged from last year’s report.
The disability fund is now expected to run out in 2052, 20 years later than projected in last year’s report, due to a continued decline in new disabled-worker applications and lower-than-expected disability incidence rates, the trustees wrote.
The report also said Medicare’s hospital insurance fund would be depleted in 2026, unchanged from last year’s report, as lower payroll taxes and reduced income from the taxation of Social Security benefits weighed on the trust fund’s income. The trust fund’s costs, meanwhile, are expected to be slightly higher than last year due to higher spending and higher projected provider payment updates.
The costs of both programs are projected to rise substantially as a share of the economy over the next 16 years, as a wave of retiring baby boomers boosts the number of beneficiaries, and lower birthrates over the past few decades weigh on employment growth and economic output.
As a share of gross domestic product, Social Security’s annual cost is expected to increase from 4.9% in 2019 to about 5.9% by 2039, while Medicare costs are projected to rise from 3.7% of GDP to 5.7% by 2035.
In 2019, the combined cost of the Social Security and Medicare programs are estimated to equal 8.7% of GDP, before rising to 11.6% by 2035. Most of the increase is attributable to Medicare, the trustees wrote. While annual Medicare costs are currently about 76% of the cost of Social Security, the program is expected to become more expensive by 2040, even as health care costs have fallen over the past decade.
“Notwithstanding the assumption of a substantial slowdown of per capita health expenditure growth, the projections indicate that Medicare still faces a substantial financial shortfall that will need to be addressed with further legislation,” the trustees said.
https://www.wsj.com/articles/social...jTvyfKFbLAKVIq24g1wSrmVcNoppRLtOpYIIcRdYL1DJ4
