Recently, the Social Security and Medicare Trustees presented their annual report at the Treasury Department in Washington which offered forecasts for the health of the government’s two largest benefits programs, including Social Security and Medicare. In that conference, it was noted that Social Security is laboring under the weight of retiring baby boomers and revenue shortfalls.
Social Security is split into two funds — one for retirement and survivor benefits, and one for disability. Some analysts suggest that the retirement fund is projected to run out of money in 2035 while the disability fund is projected to run dry in 2016. Combined, the two funds will last until 2033.
It should be noted that the rise in Social Security claims has been anticipated for decades, and the Office of the Chief Actuary of the Social Security Administration recently reported in a congressional committee that a temporary redirection of 0.2% of the FICA tax, for just 12 years, would meet the current and future demands of the Disability Trust Fund.
In addition, the Trustees project that Social Security benefits will increase next year, though the increase could be small. They project a cost-of-living-adjustment, or COLA, of 1.8 percent for 2013; the actual amount won’t be known until October. It’s also important to note that beneficiaries got a 3.6 percent increase this year, the first after two years without one.
The reality is that Social Security’s retirement and disability programs currently have funds sufficient to cover benefits for the next 20 years and our government is quite functional in the operation of these programs. Millions of people regularly receive the benefits they’ve been promised through systems and processes that have very modest administrative costs.
The Trustees of the Social Security and Medicare Trust Funds’ annual report on the financial status of these entitlement programs noted that Social Security is 100% solvent until 2033, and until that point, Congress has an opportunity to take action to supplement the reserves. These annual reports have been published for decades, and are generally recognized as the most credible, unbiased, and objective assessment of the financial health of these programs.
Pundants and observers have offered many likely remedies, should there be any sort of anticipated shortfall including the possibility of simply abolishing the current trust fund model, and paying for promised benefits by allocating appropriate government budgetary funds . Just as the government finances other promised benefits, like pensions and healthcare for retired government workers and military retirees, the government could also budget for social security disability benefits.