Social Security Trustees Issue Annual Report

The Social Security and Medicare Trustees issued their annual report this week. The report projects that the trust fund reserves will be exhausted in 2040, one year earlier than in last year’s report and that thereafter Social Security will be able to pay 74% of benefits scheduled under current law.

The Social Security and Medicare Trustees issued their annual report this week. The report projects that the trust fund reserves will be exhausted in 2040, one year earlier than in last year’s report and that thereafter Social Security will be able to pay 74% of benefits scheduled under current law. The report also projects that as of 2080, revenue will be sufficient to pay 70% of scheduled benefits, whereas last year’s report projected that as of 2079, revenue would be sufficient to pay just 68% of scheduled benefits. Changes in the assumptions regarding interest rates (lower) and birth rates (higher) are the primary reasons for the changes.

People often assume, especially after last year’s campaign for Social Security privatization, that this means that people retiring in 2040 will only receive 74 % of what someone retiring in 2006 would receive. However, the benefits scheduled under current law would increase by 2040 to reflect wage increases. Thus if no changes are made, a person retiring in 2040 would receive more in inflation-adjusted dollars than someone retiring today even though it would only be 74% of scheduled benefits.

Each year the Congressional Budget Office (CBO) also prepares its report on the trust fund which uses and different assumptions and usually projects a date for exhaustion of the reserves which is a decade later than that projected by the Social Security trustees. For further information, contact Gerald McIntyre of the NSCLC Los Angeles office.