US Social Security and Medicare Approach Insolvency, Warn Trustees
Both Social Security and Medicare programs are heading towards insolvency in the coming years, according to annual reports released by the Trustees of the two programs.
The Social Security program will be insolvent in 13 years by 2035, the Social Security Trustees said in its report (pdf). Though the finances of the Social Security program have improved slightly when compared to last year, it still remains in peril.
At present, the program cannot guarantee full benefits to current retirees. The Social Security Old-Age & Survivors Insurance (OASI) trust fund is predicted to deplete its reserves by 2034.
Though the Social Security Disability Insurance (SSDI) trust fund is expected to remain in strong financial condition, the combined trust fund will deplete by 2035 when today’s youngest retirees turn 75, and 54-year-olds enter full retirement age.
Once the program becomes insolvent, all beneficiaries will face an across-the-board benefits cut of 20 percent.
This year, the Trustees estimate Social Security to run a cash-flow deficit of $112 billion, which comes to 1.3 percent of taxable payroll.
Over the next decade, Social Security is calculated to run deficits of almost $2.5 trillion, which is equivalent to 0.8 percent of GDP or 2.1 percent of taxable payroll.
By 2040, the annual deficit is predicted to grow to 3.4 percent of taxable payroll, moving even higher to 4.3 percent of payroll by 2096.
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