Social Security and Medicare remain under financial duress with the retirement of millions of baby boomers and the pandemic. Social Security will be unable to pay full benefits in 2034, the government says, while Medicare will exhaust reserves in 2026.
FILE - In this Feb. 11, 2005 file photo, trays of printed social security checks wait to be mailed from the U.S. Treasury's Financial Management services facility in Philadelphia. The financial impact of the coronavirus pandemic on Social Security and Medicare is front and center as the government releases its annual report on the state of the bedrock retirement programs on Tuesday, Aug. 31, 2021.
The depletion date for Medicare’s trust fund for inpatient care remained unchanged from last year, estimated in 2026. For Social Security, the loss of payroll tax revenue outweighed any savings from what the program would have paid out to people whose lives were lost in the pandemic. The report noted that employment, earnings, interest rates and economic growth plummeted in the second quarter of 2020 after the pandemic hit the United States.
Government economic experts who prepared the Social Security report estimated recent increases in inflation mean the cost-of-living adjustment for 2022 will approach 6%, a whopping jump from the 1.3% COLA awarded for this year. Because reductions of that magnitude would cause a political uproar, it is likely that a future Congress would find ways to recover the lost benefits, either by hiking the payroll taxes paid by current workers or by increasing government borrowing to cover the shortfall. With Medicare, lawmakers could also raise premiums paid by beneficiaries.
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