The trust funds that finance retirementers are on track to be tapped out in the next decade, which could be a significant blow to retirees' finances.
In addition to Disability Insurance, social security is funded through the collection of payroll taxes, which is supplemented by two significant trust funds, Old-Age and Survivors Insurance. The trust funds are growing when the payroll tax collection exceeds benefits payments, but they have been dwindling due to the aging of the American population and are projected to be tapped out in a decade. After the trust fund is depleted, incoming payroll taxes will be the sole source of funding for benefits, and under current law, to match benefits paid to incoming revenue.
Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal budget, told FOX Business in an interview that the trust funds are 'tremendously endangered '. In current-dollar annual benefits, a typical dual-income couple would see a benefit cut of 23% or $17,400, while a single-income couple would see benefits cut by $13,100.
Medicare's Hospital insurance trust fund is also on track to being tapped out within a decade.
In fiscal year 2032, Social Security's Old-Age and Survivors Insurance trust fund would be depleted and its Disability Insurance trust fund would be exhausted the following year. If the two trust funds were combined in FY2033, they would also be tapped out, which could have an impact on access to health care.
The moment of Social Security and Medicare trust funds exhaustion will become more prominent for a presidential candidate in the 2024 election, as there will be limited time to address the issue while allowing current and future retirees time to plan for any changes to the programs.
t Have a smart plan to save Social Security that starts a year or a month before insolvency, you need some lead time to let people plan and adjust to face things like that. So it's really vital that the next president address this issue, Goldwein said, noting that the current frontrunners, President Joe Biden and former President Donald Trump, have each said they won't touch Social Security.
The CRFB is aiming to create a bipartisan fiscal commission to look at the U.S. government's finances and explore options to address America's imminent fiscal challenges. On two previous occasions, Goldwein said that approach helped to save Social Security on two prior occasions, in 1977 and in 1983, when the Greenspan Commission facilitated bipartisan negotiations between President Ronald Reagan and House Speaker Tip Os, and that it puts all parts - both spending and revenue - on the table.
Goldwein added that reforms to Social Security and Medicare could yield benefits such as growth in the economy and Americans' incomes as well as savings in health care costs if they're done properly.
Several studies have shown that thoughtful social security can meaningfully increase the economy and raise incomes. And thoughtful Medicare reform can actually lower health care costs, not just for the government, but for Medicare beneficiaries and even those in the private sector through spillover effects, Goldwein said.