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Lawmakers Urged to Act Soon to Shore Up Social Security
Posted By Eileen Ambrose On July 28, 2014 @ 4:16 pm In Money Talk | No Comments
The financial outlook for Social Security remains largely unchanged from last year, with the combined trust funds that pay benefits to retirees and workers with disabilities expected to exhaust reserves in 2033, according to a government report released today.
At a news conference on Monday afternoon, Treasury Secretary Jack J. Lew said Social Security and Medicare are “fundamentally secure,” though lawmakers must make reforms to bolster the programs.
“As the largest generation in American history enters retirement, the pressure on our social insurance programs is growing, and we must make manageable changes now so we do not have to make drastic changes later,” he said.
The annual report is a 75-year forecast on the health of the safety net for older Americans. (The outlook for Medicare improved by four years, with its reserves expected to exhaust in 2030.)
Social Security benefits come through two trust funds: one for retirees and their survivors, the other for those with disabilities. The combined reserves are projected to continue growing through 2019; after that the programs’ reserves will be drawn down, as costs will exceed their income.
Taken separately, the fund that pays disability benefits is set to deplete its reserves much more quickly. Unless Congress acts, the Disability Insurance fund will run out of reserves in 2016, at which time it will have enough money coming in through the payroll tax to pay 81 percent of its obligations. There are about 58 million Social Security recipients, including 11 million Americans who receive disability benefits.
Part of the reason for the pressure on the trusts is demographics, explained Alison Shelton, a senior strategic policy adviser for the AARP Public Policy Institute.
“The population is bigger, but it is also aging,” she said.
More Americans are falling into the age group of 50 to 61, which are disability-prone years, Shelton said. And as more women have entered the labor force, more of them have become eligible for disability benefits.
This isn’t the first time the disability fund has approached such a deadline. The trustees’ 1994 report, for example, projected that the disability fund would deplete its reserves the next year. Back then, Congress reinforced the fund by shifting a slightly larger portion of payroll taxes to it. Currently, the payroll tax totals 12.4 percent of workers’ pay, with employers and employees each contributing half. Most of that money, or 10.6 percentage points, goes toward retirement and survivor benefits. The rest, 1.8 percentage points, supports disability benefits.
AARP and others support a similar reallocation again.
Nancy LeaMond, AARP executive vice president, said in a statement that the new report “confirms that if the combined resources of the Social Security trust funds are rebalanced, no beneficiary needs to face an imminent reduction in their earned benefits.”
LeaMond said though Social Security remains strong, “modest changes” will be needed to ensure its future for generations to come. She also advocated for a national debate on the growing retirement insecurity in the country and the role of Social Security benefits.
“Americans of all ages deserve an honest, open, national discussion about the value of Social Security and its importance to millions of retired workers, spouses, children, veterans and persons with disabilities,” LeaMond said. “We strongly urge Congress to hold a separate debate on the solvency and adequacy of Social Security, as it is a separate, self-financed program that people pay into throughout their lives and count on for each generation of our families.”
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