Social Security Fund Will Be Able to Pay Benefits One Year Longer Than Expected

The financial health of Social Security and its companion program, Medicare, is critically important to the millions of retirees and disabled Americans who receive benefits from these crucial safety nets. They are the two most popular government programs by a wide margin.

For years, concern has grown about the future of Social Security due to projected long-term funding shortfalls. However, the Social Security trustees announced a bit of good news last month. Social Security will be able to continue to pay out benefits on a timely basis until 2034, one year later than the Treasury Department estimated last year.

The Social Security Administration collects payroll taxes and uses the money collected to pay Old-Age, Survivors, and Disability Insurance benefits by way of two trust funds which are financial accounts in the U.S. Treasury.

The annual government report on the health of the trust funds said the economic recovery from the 2020 recession was “stronger and faster” than assumed in last year’s projections.

The outlook for the Social Security Disability Trust fund is rosier. The report states that the government’s disability insurance program will be able to pay full benefits over the next 75 years.

Unless Congress acts before the old-age trust fund is depleted, federal law mandates that benefits can only be paid with current payroll tax collections. Based on government projections, this would mean an automatic 20% or more across-the-board cut in benefits.

This will be a disaster for many Americans whose main sources of income are modest Social Security checks and are barely getting by now.

“Lawmakers have many policy options that would reduce or eliminate the long-term financing shortfalls in Social Security and Medicare,” the trustee’s report said. “Taking action sooner rather than later will allow consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.”