Starting in 2020, the Social Security trust funds for retirement and disability insurance will begin drawing down assets to pay benefits, according to the Social Security trustees' annual report issued Monday.
It would be the first time since 1982 that Social Security's total cost has exceeded its total income, the report said.
The trust funds — one that covers retirees and their families and one that covers disabled workers and their families — will be out of money by 2035. The fund devoted to retirees is projected to become depleted in 2034, at which time Social Security revenue will cover only 77% of benefits promised, the report said.
If "substantial actions" are deferred for several years, the burden would be concentrated on fewer generations, the trustees said. Much larger changes would be necessary if action is deferred until 2035.
Projected costs are expected to rise more rapidly as more baby boomers retire than people enter the workforce. Social Security's annual cost, in relation to the projected gross domestic product, is predicted to increase to about 5.9% by 2039, up from 4.9% in 2019, according to the report.
The trustees urged lawmakers to address the problem quickly. "Implementing changes sooner rather than later would allow more generations to share in the needed revenue increases or reductions in scheduled benefits," the report said.
In Congress, Rep. John B. Larson, D-Conn., who is chairman of the House Ways and Means Social Security Subcommittee, introduced the Social Security 2100 Act in January. The bill, for which no markup or vote has been scheduled, aims to shore up Social Security by implementing an across-the-board benefit increase for current and new beneficiaries and improving cost-of-living adjustments, among other provisions. The added benefits would be paid for by gradually increasing the contribution rate beginning in 2020 so that by 2043, workers and employers would pay 7.4%, instead of the 6.2% today, according to the congressman's website.
Senate Finance Committee Chairman Chuck Grassley, R-Iowa, said in a statement that bipartisan work will be needed to shore up both Social Security and Medicare. "While the strong economy and labor markets are helping Americans across the board, Social Security and Medicare trust funds also benefit," Mr. Grassley said. "However, it remains that those trust funds are not financially sustainable, and reforms are necessary to ensure stability and sustainability of Medicare and Social Security programs."
In a statement Monday, Treasury Secretary Steven T. Mnuchin said, "We remain committed to further bolstering the programs' finances, which will benefit from the long-term growth we will see as a result of the administration's economic policies."