Social Security Benefits Will Be Depleted by 2034 Due to the Covid-19 Pandemic

According to an annual report released Tuesday by the Social Security and Medicare trustees, if Congress does nothing to solve the program’s long-term financing problem, payouts will have to be slashed by 2034.

That’s a year sooner than the previous year’s estimate. By that time, Social Security’s combined trust funds will be drained, with only 78% of projected payouts to retirees and disabled beneficiaries remaining.

The Covid-19 pandemic and economic slump are to blame for accelerating the depletion rate by a year, owing to a significant loss in employment and a corresponding drop in payroll tax revenue. The trustees also predict a higher mortality rate until 2023, as well as a short-term delay in births.

However, the long-term implications of the pandemic on the funds are unknown, and the trustees will continue to watch developments. The impacts of the pandemic were not taken into consideration in last year’s study.

The Medicare forecasts are similar to those in last year’s study.

By 2026, The Medicare Part A trust fund, which covers hospital and nursing facility expenditures for seniors will be depleted. The program would only be able to pay out 91% of promised payments at that point.

According to the report, Medicare Part B, which helps seniors pay for doctor visits and outpatient care, and Part D, which covers prescription drug benefits, are “adequately financed into the indefinite future.”  This is due to the fact that the law mandates that they receive automatic funding.

Around 65 million people were receiving Social Security benefits towards the end of 2020, while nearly 63 million people were insured by Medicare.

To address the long-term shortfall, the trustees encouraged Congress to act sooner rather than later. Congress, on the other hand, has been deferring action on the trust funds’ solvency for a long time. Payroll taxes could be raised, benefits cut, or a mix of the two enacted by lawmakers.

President Joe Biden campaigned on increasing Social Security payments, but his economic policy has so far remained unchanged.