Social Security and Medicare’s annual checkup found that the entitlement system continues to face long-term financial challenges. The Social Security trust fund is expected to be exhausted in 2036, one year sooner than was projected last year. And the date Medicare’s hospital insurance trust fund is projected to be depleted has advanced up to 2024, five years earlier than in last year’s report. Once those dates pass, there will only be sufficient resources coming in to pay out about 77 percent of scheduled Social Security benefits and 90 percent of retirees hospital insurance costs, unless changes are made to the program.
There will be enough funds to pay out promised Social Security benefits for about 25 years and the amount of money in reserve increased last year, according to the Social Security Board of Trustees report released today. The assets of the Social Security trust funds grew by $69 billion in 2010 to a total of $2.6 trillion. Approximately $781 billion was deposited into the OASDI trust funds in 2010, including $637 billion in net contributions, $24 billion from the taxation of benefits, $117 billion in interest, and $2 billion in reimbursements from the general fund of the Treasury. Some 157 million people paid payroll taxes into the trust funds in 2010 and the trust fund assets earned an interest rate of 4.6 percent.
Expenditures from the Social Security trust fund totaled $713 billion last year. Some 54 million Social Security beneficiaries collected $702 billion worth of payouts. It also cost about $6.5 billion to administer the program in 2010, or about 0.9 percent of total expenditures. Hospital insurance costs have exceeded income annually since 2008 and are projected to continue doing so until the trust fund becomes exhausted in 2024. In 2010, $32.3 billion in trust fund assets were used to pay for expenditures beyond incoming tax revenue.
Trustees for the funds emphasized the need to make changes to the programs to ensure long-term financial viability. “Today’s reports make clear that while both Social Security and Medicare have sufficient resources to meet their obligations for at least the next decade, it is important that we put in place reforms to strengthen these programs,” says Treasury Secretary Tim Geithner. “Fundamentally, Social Security and Medicare benefits are secure today, but reform will be needed so that they will be there for current and future retirees.” The Senate Committee on Finance held a hearing this week to examine potential Social Security changes and whether they should be included in deficit reduction legislation. The federal government is expected to reach the debt limit set by Congress on Monday, May 16.
After two years without a cost-of-living adjustment to their benefits, Social Security recipients are currently projected to get a 0.7 percent increase in 2012 and a 1.7 percent boost in 2013. The amount workers who claim Social Security benefits early can earn without having their checks temporarily withheld is expected to remain the same next year before increasing slightly in 2012. The maximum amount of earnings workers pay Social Security payroll taxes on is expected to remain $106,800 in 2011, but then increase to $110,700 in 2012.