Social Security fund will be able to pay benefits one year longer than expected, Treasury says

U.S. Treasury Secretary Janet Yellen takes off her mask at the start of a Senate Banking, Housing and Urban Affairs Committee hearing on “Financial Stability Oversight Council Annual Report to Congress,” on Capitol Hill in Washington, U.S., May 10, 2022. 

The Social Security trust fund will be able to pay out benefits on time until 2034, one year later than the Treasury Department estimated last year, according to an updated report published by the government.

The government's disability insurance program will be able to pay full benefits over the next 75 years, for the first time since 1983, according to an improved analysis signed by the treasury secretary and labor secretary.

The Disability Insurance Trust Fund would be exhausted in 2057, according to last year's report. The government said that Medicare Part A will be fully funded through the year 2028.

The economic recovery from the Covid-19 recession is what caused the improved outlook for the various funds.

The main reasons for the smaller deficit are a stronger than expected recovery from the recession and higher expected levels of labor productivity.

The recovery of employment, earnings, and GDP from the 2020 recession has been faster and stronger than projected in last year's report, resulting in higher payroll tax receipts and higher revenue from income taxation of social security benefits.

The Old- Age and Survivors Insurance and the Disability Insurance Trust Funds are looked after by the treasury department. Two programs were created to provide a source of income for former workers who have retired at the end of their careers and for those who can't work because of a disability.

Despite the revised projections, the financial outlook for Social Security is bleak without government intervention or changes to the country's tax code.

If Congress doesn't act by the time the main Social Security trust fund is exhausted, federal law will automatically cut benefit checks for retirees.

It could be disastrous for Americans who have planned on that source of income for a long time, hoping that their payroll taxes will eventually come back to provide for them in their retirement.

The funds act as pillars of the retirement plans of tens of millions of Americans and are among the most popular safety-net programs.

According to the government report, lawmakers have many policy options that could reduce or eliminate the long-term financing shortfalls in Social Security and Medicare. Taking action sooner will allow consideration of a broader range of solutions and provide more time to phase in changes so that the public has enough time to prepare.