WASHINGTON (AP) — High energy prices and an economy that has been slow to rebound are worsening Social Security’s finances, shortening the life of the trust funds that support the program by three years, the government said Monday.
Those trust funds will now run dry in 2033, according to a report issued by the trustees that oversee the massive retirement and disability program.
Medicare’s hospital insurance fund is projected to run out of money in 2024, which is unchanged from last year. The trustees, however, said Medicare spending continues to rise.
Congress enacted a 2 percent cut in Medicare last year, which is the main reason the trust fund exhaustion date did not advance.
If the Social Security and Medicare funds ever become exhausted, the nation’s two biggest benefit programs would collect only enough money in payroll taxes to pay partial benefits.
The trustees said in their annual report that Congress should address the programs as soon as possible, but no action is likely before the November election.
“Lawmakers should not delay addressing the long-run financial challenges facing Social Security and Medicare,” the trustees wrote. “If they take action sooner rather than later, more options and more time will be available to phase in changes so that the public has adequate time to prepare.”
Social Security’s finances worsened in part because high energy prices suppressed wages, a trend the trustees see as continuing. The trustees said they expect workers to work fewer hours than previously projected, even after the economy recovers.
This year’s cost-of-living-adjustment, or COLA, was also higher than expected. That was good news for seniors, who saw their benefits increase by 3.6 percent, but it drained more resources from Social Security.
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The trustees project a 1.8 percent COLA for next year, though the actual amount won’t be set until October.
Social Security is split into two funds — one for retirement and survivor benefits and one for disability. The retirement fund is projected to run out of money in 2035 while the disability fund is projected to run dry in 2016.
The trustees who oversee Social Security are urging Congress to shore up the disability system by reallocating money from the retirement program, just as lawmakers did in 1994.
Combined, the two funds will last until 2033. If they run dry, payroll taxes would cover about 75 percent of benefits.
“This year’s trustees report contains troubling but not unexpected projections about Social Security’s finances,” said Social Security Commissioner Michael J. Astrue. “It once again emphasizes that Congress needs to act to ensure the long-term solvency of this important program, and needs to act within four years to avoid automatic cuts to people receiving disability benefits.”