The Social Security and Medicare Trustees released their annual reports today on the finances of both programs. The reports are an annual reminder of the action lawmakers should take to ensure the long-term solvency of Social Security and Medicare – both of which continue to face large and growing shortfalls. With regards to Social Security, the Trustees show that:
- The Social Security Disability Insurance (DI) trust fund is on the brink of insolvency, and is projected to be exhausted in 2016 – just 2 years from today. Absent legislation, beneficiaries in that program would face an immediate 19 percent across-the-board benefit cut.
- Assuming reallocation or interfund borrowing, the combined Old Age, Survivors’, and Disability Insurance (OASDI) trust fund is projected to be exhausted in 2033. At that point, absent reform, all beneficiaries would face an immediate 23 percent across-the-board benefit cut.
- Over 75 years, Social Security’s actuarial imbalance totals 2.88 percent of taxable payroll, or 1.02 percent of GDP. This is modestly higher than the 2.72 percent of taxable payroll (0.98 percent of GDP) imbalance that the Trustees reported last year.
- The gap between Social Security spending and revenues is projected to grow from 1.3 percent of payroll (0.45 percent of GDP) this year to 3.9 percent of payroll (1.4 percent of GDP) by 2035 and 4.9 percent of payroll (1.7 percent of GDP) by the end of the 75-year window.
- This report represents the fourth straight year where the 75-year shortfall has increased. In the 2010 report, the shortfall was estimated at 1.92 percent of taxable payroll, but it is now about fifty percent larger at 2.88 percent.
Although the projections have worsened somewhat, Social Security’s long-term outlook is fundamentally unchanged. The DI trust fund will be insolvent in just two years, and the old-age trust fund by the time today’s 48-year-olds reach the normal retirement age – or when today’s 60-year-olds turn 79. The report sends a clear signal on the need for lawmakers to act promptly to reform and secure the Social Security programs for current and future generations
Download the report here.