Social Security will be unable to pay full benefits starting in 2034 because of the impact of the Covid-19 crisis, according to a new report from the program's trustees.
The report moved up by one year the date for the depletion of Social Security's reserves, while Medicare’s depletion date remained 2026, the same as trustees forecast last year, according to the report, which was released yesterday.
"The finances of both programs have been significantly affected by the pandemic and the recession of 2020," the trustees said.
In the meantime, the trustees said that recent increases in inflation mean the cost-of-living adjustment (COLA) for 2022 will approach 6%, a significant jump from the 1.3% COLA awarded this year.
Inflation is also expected to impact Medicare Part B premiums for outpatient coverage, which are projected to rise by $10 a month in 2022, to $158.50 under the report's intermediate assumptions.
The new report, which has been delayed by the Treasury Department for a number of months, represents the government's effort to assess the impact of last year's pandemic and recession on the financial health of the two big benefit programs.
When the Social Security trust fund is depleted, the government will still be able to pay 78% of scheduled benefits, the trustees reported.
“Social Security beneficiaries would still get 78% in 2034 even if Congress does nothing at all,” Martha Shedden, president and co-founder of the National Association of Registered Social Security Analysts, told Financial Advisor magazine.
“There are so many variables that can be adjusted that can extend the longevity of the system for decades, it’s just going to take that shock of the possibility that benefits will be reduced to get lawmakers to act,” Shedden said. "I do not think retirees will allow their benefits to be reduced by 24%."
The AARP is busy lobbying Congress to ensure the organization, which represents 38 million members, has a seat at the table whenever legislation is introduced.