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Community Work & Retirement
07-14-2017 07:53 PM
Here is a link to the Summary - 2017 Social Security and Medicare Trustee Report SUMMARY
Each year the Trustees of the Social Security and Medicare trust funds report on the current and projected financial status of the two programs. This message summarizes the 2017 Annual Reports.
These are just a few of the highlights - in this post I am (mostly) only covering Social Security in detail.
1. Both Social Security and Medicare face long-term financing shortfalls under currently scheduled benefits and financing.
2. Social Security and Medicare together accounted for 42 percent of Federal program expenditures in fiscal year 2016. The unified budget reflects current trust fund operations. Consequently, even when there are positive trust fund balances, any drawdown of those balances, as well as general fund transfers into Medicare's Supplementary Medical Insurance (SMI) fund and interest payments to the trust funds that are used to pay benefits, increase pressure on the unified budget.
NOTE: Medicare Part B is the Supplementary Medical Insurance (SMI) - by law, those on Medicare have to pay a premium for Medicare Part B. Higher Income Medicare Beneficiaries pay a higher premium for Medicare Part B. These premiums represent about 25% of the program and the remaining 75% comes from the U.S. General Fund (taxes).
3. Both Social Security and Medicare will experience cost growth substantially in excess of GDP growth through the mid-2030s due to rapid population aging caused by the large baby-boom generation entering retirement and lower-birth-rate generations entering employment.
4. The Social Security program provides workers and their families with retirement, disability, and survivors insurance benefits. Workers earn these benefits by paying into the system during their working years. Over the program's 82-year history, it has collected roughly $19.9 trillion and paid out $17.1 trillion, leaving asset reserves of more than $2.8 trillion at the end of 2016 in its two trust funds.
The Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivors benefits, and the Disability Insurance (DI) Trust Fund, which pays disability benefits, are by law separate entities.
The combined funds-designated OASDI- satisfy the Trustees' test of short-range (ten-year) financial adequacy. The Trustees project that the combined fund asset reserves at the beginning of each year will exceed that year's projected cost through 2029. However, the funds fail the test of long-range close actuarial balance.
5. The Trustees project that the combined trust funds will be depleted in 2034, the same year projected in last year's report. "Depletion" in this sense means that the trust funds will not have enough money in 2034 to pay out FULL benefits. This "depletion" time is when there is NO reserve left to make up the difference in payroll taxes collected and benefits paid out. Based on the SS Law, if this does happen benefits will be reduced for everybody unless other action is taken, hopefully before this happens.
In 2016, the Social Security Disability Trust Fund was in very bad shape and a reduction of benefits for SSDI beneficiaries would have been done except that our lawmakers came together and gave the SSDI Trust Fund some money from the other Trust Fund, the Old Age and Survivors Trust Fund.
6. Social Security gets income from several sources - the main place is from payroll taxes.
The other places are from interest paid by the Treasury for the amount which has been built up over the years from money not used to pay benefits. And those folks who have to pay taxes on their Social Security, based on their total income - these taxes also go into the Trust Fund.
7. Social Security is said to be deficient if income coming from payroll taxes is not enough to cover the benefits paid.
8. Social Security's total income (all income) is projected to exceed its total cost through 2021, as it has since 1982. The 2016 surplus of total income relative to cost was $35 billion. However, when interest income is excluded, Social Security's cost is projected to exceed its non-interest income throughout the projection period, as it has since 2010. The Trustees project that this annual non-interest deficit will average about $51 billion between 2017 and 2020. It will then rise steeply as income growth slows to its sustainable trend rate as the economic recovery is complete while the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers.
9. After 2021, interest income and redemption of trust fund asset reserves from the General Fund of the Treasury will provide the resources needed to offset Social Security's annual deficits until 2034, when the OASDI reserves will be depleted. Thereafter, scheduled tax income is projected to be sufficient to pay about three-quarters of scheduled benefits through the end of the projection period in 2091. The ratio of reserves to one year's projected cost (the combined trust fund ratio) peaked in 2008, declined through 2016, and is expected to decline steadily until the trust funds are depleted in 2034.
10. Lawmakers have a broad continuum of policy options that would close or reduce the long-term financing shortfall of both programs. The Trustees recommend that lawmakers take action sooner rather than later to address these shortfalls, so that a broader range of solutions can be considered and more time will be available to phase in changes while giving the public adequate time to prepare.
- increasing income into the program
- reducing or modifying some benefits
- or a combination of the above
Legislators on both sides of the isle have submitted proposed legislation to try to fix this problem but to date none has filled the shortfall in total but they keep trying and of course none have been passed to date.
If anybody is interested, this is where the Social Security Actuaries actually do the analysis of each plan (proposed legislation) and you can see what each of the plans are trying to do and how much each aspect of them will cost or save.
I hope that you will contact your legislator and make sure they don't forget action on this important program - 2034 is not that far away. They need to work together to fix this - just like President Reagan and Speaker Tip O'Neil did in the early 80's.
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