Social Security trust funds are expected to run out of money sooner than expected because of COVID-19, a report published by the Treasury Department on Tuesday said. According to the report, the trust funds will run out of money in 12 years because of the healthcare costs for Americans in old age.
The trust funds for the Social Security benefits are taken from the Old-Age and Survivors Insurance and the Disability Insurance. Both are designed to provide a source of income for former workers who have already retired or those who cannot work because of their disability, according to a CNBC report.
The Old-Age and Survivors trust fund is expected to pay scheduled benefits until 2033, which is a year earlier than the annual government report in 2020. The Disability Insurance trust fund, on the other hand, is expected to have funds until 2057, which is eight years earlier than the expected year stated in the annual government report in 2020.
Although a spike in deaths among retirement-age Americans in 2020 helped keep the programs’ costs lower than the projections, the long-term impact of coronavirus is still affecting the trust funds. The Treasury Department pointed out that they do not expect to resume the pre-pandemic trajectories after COVID-19.
Aside from Social Security, Medicare is also expected to have changes in its projection. They expect their insurance fund will be gone by 2026. When that happens, doctors, hospitals, and nursing homes will not receive their full compensation. So, patients will most likely take on the responsibility for the cuts as to their coverage.
In a statement, Treasury Secretary Janet Yellen: “Having strong Social Security and Medicare programs is essential in order to ensure a secure retirement for all Americans, especially for our most vulnerable populations. The Biden-Harris Administration is committed to safeguarding these programs and ensuring they continue to deliver economic security and health care to older Americans.”
It is unclear what are the steps they are taking to help secure the trust funds.