Social Security’s reserves will be depleted by 2034—the year the program will no longer be able to pay full benefits, partly because of the Covid-19 crisis. That’s going to mean a 22% cut in benefits.
“The finances of both [Social Security and Medicare] have been significantly affected by the pandemic and the recession of 2020,” the program’s trustees said in a report released in late August.
The 2034 depletion date comes one year earlier than last year’s estimate. Medicare’s depletion date remained 2026, the same as trustees forecast last year.
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,” says Martha Shedden, president and co-founder of the National Association of Registered Social Security Analysts.
The report, which had 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.
“There are so many variables that can be adjusted that can extend the longevity of the system for decades,” Shedden said. “It’s just going to take that shock of the possibility that benefits will be reduced to get lawmakers to act.”
The AARP, with 38 million members, is busy lobbying Congress to ensure it has a seat at the table whenever Social Security legislation is introduced.
“Any discussion about Americans’ earned benefits demands public input and a full and open debate,” said Jo Ann Jenkins, the group’s CEO, in a statement. An April 2021 AARP survey found overwhelming bipartisan opposition to cutting Social Security and Medicare benefits to pay down the deficit.
“The fact that this might happen in 10 or more years doesn’t negate the fact that investors should still be planning now how to best maximize their Social Security benefits,” Shedden warned. “We can analyze the possibility of this type of decrease in 2034 along with all their other personal data to show investors how to take the maximum benefit over their lifetime. If the Social Security benefit is going to be cut, it will be cut whether you take Social Security early or not.”