The federal government just released its annual reports on the stability and solvency of Social Security and Medicare, and there’s both good and bad news.
The bad news is that two of the trust funds underlying the programs are projected to run out of money in less than a decade. The good news is that the other two trust funds will last indefinitely.
Following is a quick look at the status of the trust funds for Social Security and Medicare, along with what you can expect to receive after each runs out of money.
Social Security’s retirement trust fund
Trust fund name: Old-Age and Survivors Insurance (OASI)
When its reserves are now projected to be depleted: 2033 (which is about the same projection as last year)
What happens when its reserves are depleted: Incoming funds will be enough to pay for 77% of all scheduled benefits (which is also the same as last year). At least theoretically, this means someone who receives, say, $1,000 per month in Social Security retirement benefits would instead receive only $770 per month starting in 2033.
The OASI trust fund is what provides monthly benefits to retired workers, their families and their surviving spouses — in other words, it’s what we traditionally think of as Social Security. It is funded primarily by the FICA taxes, aka payroll taxes, that Americans pay during their working years.
Social Security’s disability trust fund
Trust fund name: Disability Insurance (DI)
When its reserves are now projected to be depleted: 2099 or later (which is essentially the same projection as last year)
What happens when its reserves are depleted: NA
The DI trust fund provides monthly benefits to disabled workers and their families. Like the OASI trust fund, it’s funded by payroll taxes.
The trustees’ latest projections only cover a 75-year period, and the DI trust fund is not projected to run dry during that period. In other words, it’s good through at least 2099.
Medicare’s hospital trust fund
Trust fund name: Hospital Insurance (HI)
When its reserves are now projected to be depleted: 2033 (which is three years earlier than was projected last year)
What happens when its reserves are depleted: Incoming funds will be enough to pay for 89% of all scheduled benefits
The HI trust fund is for Medicare Part A, which helps pay for inpatient hospital services, hospice care and skilled nursing facilities. It is funded by payroll taxes and income taxes on Social Security benefits as well as Medicare premiums.
Medicare’s medical trust fund
Trust fund name: Supplementary Medical Insurance (SMI)
When its reserves are now projected to be depleted: Not for at least 75 years (which is essentially the same projection as last year)
What happens when its reserves are depleted: NA
The SMI trust fund is for Medicare Parts B and D. Part B helps pay for physician and outpatient hospital services, while Part D helps with prescription drugs.
The latest trust fund report says SMI “is adequately financed into the indefinite future because, unlike the other trust funds, its main financing sources — enrolled beneficiary premiums and the associated federal contributions from the Treasury — are automatically adjusted each year to cover costs for the upcoming year.”
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