WASHINGTON–As if credit unions needed another reason to remind members of the importance of savings, new data from the federal government indicate the financial outlook for Social Security is eroding more quickly than previously expected.
The reason? The coronavirus pandemic has drained government revenues and put additional strain on Social Security’s finances.
Annual government reports released this week on the solvency of the programs “underscored the questions about their long-term viability at a time when a wave of baby boomers are retiring and the economy faces ongoing uncertainty as variants of the coronavirus surge,” noted CNBC.
The report noted the United States economy already faces soaring federal debt levels in the coming decades, but both Democrats and Republicans have been wary of making significant structural reforms to the popular programs.
“Having strong Social Security and Medicare programs is essential in order to ensure a secure retirement for all Americans, especially for our most vulnerable populations,” Treasury Secretary Janet L. Yellen said in a statement. “The Biden-Harris administration is committed to safeguarding these programs and ensuring they continue to deliver economic security and health care to older Americans.”
COVID Effects Unclear
Senior administration officials said that the long-term effects of the pandemic on the programs are unclear, CNBC reported, adding the actuaries were forced to make assumptions about how long COVID would continue to cause unusual patterns of hospitalizations and deaths and whether it would contribute to long-term disabilities among survivors.
The Social Security Old-Age and Survivors Insurance Trust Fund will now be depleted in 2033, a year earlier than previously projected, according to the federal government reported.
“At that time, the trust fund will run out of reserves and the program will be insolvent, with new tax revenues failing to cover scheduled payments,” CNBC stated. “The report estimated that 76% of scheduled benefits will be able to be paid out unless Congress changes the rules to allow full payouts.”
According to the report, the Disability Insurance Trust Fund is now expected to be depleted by 2057, which is eight years earlier than previously thought, at which time 91% of benefits will be paid.
Some Good News
The report did find some good news: Medicare’s finances are effectively holding steady. While tax revenue for the Medicare program did decline as a result of the COVID-related recession, Medicare also ended up spending less money than usual last year, as people avoided elective care, MSNBC said.