Social Security Costs To Exceed Income In 2020, Trustees Say (#GotBitcoin?)
The Social Security program’s costs will exceed its income in 2020 for the first time since 1982—two years later than officials projected last year—forcing the program to dip into its nearly $3 trillion trust fund to cover benefits. Social Security Costs To Exceed Income In 2020, Trustees Say (#GotBitcoin?)
The trust fund to be depleted by 2035, they add.
But by 2035, those reserves will be depleted and Social Security will no longer be able to pay its full scheduled benefits, according to the latest annual report by the trustees of Social Security and Medicare released Monday.
“Both Social Security and Medicare face long-term financing shortfalls under currently scheduled benefits and financing,” the trustees wrote, urging lawmakers to take action sooner rather than later to give policy makers enough time to phase in changes and shore up the programs.
Social Security consists of two programs, one for retirees and one for people who claim disability benefits. Taken separately, the retirement program will be able to pay full benefits on a timely basis until 2034, unchanged from last year’s report.
The disability fund is now expected to run out in 2052, 20 years later than projected in last year’s report, due to a continued decline in new disabled-worker applications and lower-than-expected disability incidence rates, the trustees wrote.
The report also said Medicare’s hospital insurance fund would be depleted in 2026, unchanged from last year’s report, as lower payroll taxes and reduced income from the taxation of Social Security benefits weighed on the trust fund’s income. The trust fund’s costs, meanwhile, are expected to be slightly higher than last year due to higher spending and higher projected provider payment updates.
The costs of both programs are projected to rise substantially as a share of the economy over the next 16 years, as a wave of retiring baby boomers boosts the number of beneficiaries, and lower birthrates over the past few decades weigh on employment growth and economic output.
As a share of gross domestic product, Social Security’s annual cost is expected to increase from 4.9% in 2019 to about 5.9% by 2039, while Medicare costs are projected to rise from 3.7% of GDP to 5.7% by 2035.
In 2019, the combined cost of the Social Security and Medicare programs are estimated to equal 8.7% of GDP, before rising to 11.6% by 2035. Most of the increase is attributable to Medicare, the trustees wrote. While annual Medicare costs are currently about 76% of the cost of Social Security, the program is expected to become more expensive by 2040, even as health care costs have fallen over the past decade.
“Notwithstanding the assumption of a substantial slowdown of per capita health expenditure growth, the projections indicate that Medicare still faces a substantial financial shortfall that will need to be addressed with further legislation,” the trustees said.
Workers, Retirees Are Feeling Better About Retirement Finances
Confidence in having enough money for golden years hits all-time high in latest survey.
With the U.S. economy strong and stocks near record levels, retirees’ and workers’ confidence in having enough money for retirement have risen over the past year to all-time highs, according to a long-running survey released Tuesday.
According to the annual report by the nonprofit Employee Benefit Research Institute, 82% of polled retirees are optimistic about their ability to live comfortably in retirement, up from 75% last year. The figure closely matches the levels recorded in 2005 and 2017 and is the highest since the survey started in 1990.
Among those who are still working, 67% are confident in their financial prospects during retirement, up from 64% last year. Today’s level is so close to the survey’s all-time high of 69% in 1999 that it is statistically indistinguishable, said Craig Copeland, a senior research associate at EBRI. Moreover, the percentage of workers who are very confident, 23%, is dramatically higher than last year’s 17%.Mr. Copeland said the strong economy is likely responsible for this year’s optimistic results.
“Typically, as the economy improves and workers become more confident in their current situation, it spills over to their confidence” about retirement, he said. In addition, he added, in a strong economy, many people are able to save more and take steps to plan for retirement, which also boost confidence.
Published annually for the past 29 years, the survey provides a long-running snapshot of how Americans feel about their retirement prospects. This year’s survey of 1,000 retirees and 1,000 workers ages 25 and older was conducted in January.
The survey found that confidence among workers and retirees in having enough for both retiree medical and long-term-care expenses rose: 80% of retirees are very or somewhat confident they will have enough to cover medical expenses in retirement. That is up from 70% last year, when many retirees experienced a steep increase in the standard premium for Medicare Part B, which pays for doctor visits and other types of outpatient care. This year, the standard Part B premium for most people is $135.50, up from $134 last year. In 2017, many people paid about $109.
Some 66% of American workers said they or a spouse have saved money for retirement. On one end, 40% of workers reported that the total value of their savings, excluding home equity, is below $25,000. In contrast, 23% said they have saved $250,000 or more.
As in past years, retirees expressed more confidence than workers did in having enough for a comfortable retirement. In general, Mr. Copeland said, it is typical for workers to be less confident than retirees because those who are further from retirement face greater uncertainty.
Of course, optimism stemming from strong economic conditions can shift. “If the economy takes a turn for the worse, these levels would likely fall as has occurred in the past,” he said. “Yet, if more people have thought about retirement and increased savings, they could still be better off than if the economy hadn’t stayed strong for this long of a period.”
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