Ronald Reagan Presidential Foundation Director Daniel Rothschild discusses how Americans are feeling about potential Social Security tax hikes on ‘Varney & Co.’
The trustees for Social Security and Medicare released their annual report on the status of the entitlement programs’ trust funds, which are expected to be depleted sooner than previously thought.
The Social Security and Medicare trustees “found that the Social Security and Medicare programs both continue to face significant financing issues.”
Trustees found that if Social Security’s Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust funds were combined, the trust funds would be able to pay 100% of scheduled benefits until 2034, one year earlier than reported last year. The depletion dates for both Social Security trust funds advanced by three calendar quarters compared to last year.
At the time of depletion in 2034, the trust funds would be able to pay only 81% of scheduled benefits, meaning Social Security recipients would see a mandatory 19% cut automatically. That’s because Social Security benefits are financed through a combination of payroll taxes from current workers along with the trust funds, which would leave the program relying solely on payroll tax revenue once the trust funds are depleted.
CBO SAYS US BUDGET DEFICITS TO WIDEN, NATIONAL DEBT TO SURGE TO 156% OF GDP
Social Security and Medicare would see mandatory benefit cuts if the trust funds are depleted. (iStock / iStock)
For comparison, the average monthly Social Security benefit as of January 2025 was $1,976, according to Social Security Administration (SSA) data. A cut of 19% would amount to a reduction of $376 per month, lowering the payment to $1,600 a month.
Medicare’s Hospital Insurance (HI) trust fund is projected to be depleted in 2033, three years earlier than last year’s report, according to the trustees. At that time, 89% of scheduled benefits would be payable, leading to an 11% reduction in payments relative to pre-depletion levels.
“The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust their expectations and behavior,” the report said.
SOCIAL SECURITY PAYMENTS TO INCREASE FOR PUBLIC PENSION RECIPIENTS
Social Security recipients would face a 19% benefit cut if the trust funds are depleted. (Jeffrey Greenberg/Education Images/Universal Images Group via Getty Images / Getty Images)
“With informed discussion, creative thinking, and timely legislative action, Social Security and Medicare can continue to protect future generations,” the trustees added.
The Social Security and Medicare trust funds are facing depletion due to the aging of America’s population relative to prior decades, as the ratio of workers to retirees has shifted.
Data from the SSA shows the ratio of covered workers paying taxes to the number of beneficiaries was 8.6 workers to beneficiaries as of 1955. That number has declined to 2.8 as of 2013 due to the aging of the population.
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The depletion of Medicare’s Hospital Insurance trust fund would prompt an 11% benefit cut. (Kayla Bartkowski/Getty Images / Getty Images)
“Social Security and Medicare won’t even be able to pay full benefits to current retirees – they will be insolvent when today’s 59-year-olds reach the full retirement age and today’s youngest retirees turn 70,” Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget, said in a statement.
“Where is the sense of urgency?
“It’s time to start telling the truth when it comes to Social Security and Medicare. We are running out of time to phase in changes gradually and avoid harsh cuts, sharp tax increases or unacceptable borrowing,” MacGuineas added. “Demagoguing this issue may be politically expedient, but it will ultimately prove ruinous for the tens of millions of Americans that rely on the programs.”
AARP CEO Myechia Minter-Jordan said in a statement it’s critical for Americans to be able to rely on Social Security and Medicare in their retirements and urged Congress to take steps to protect the programs.
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“AARP members and older Americans nationwide consistently say that the future of Social Security and Medicare are the issues they care about most, and they stand ready to hold politicians across party lines accountable to strengthen these programs for the long term,” Minter-Jordan said.
