A new report released by the Social Security Administration on Tuesday reveals new estimates of just how much the Covid-19 pandemic has impacted the program’s already ailing trust funds.
The results show the funds from which the program pays benefits have been “significantly affected” by both the pandemic and the ensuing recession of 2020.
Now, the fund that pays retirement and survivor benefits — known as the Old-Age and Survivors Insurance Trust Fund — will be able to pay full benefits as scheduled only until 2033. That is one year earlier than last year’s projections.
At that time, the program will only be able to pay 76% of those scheduled benefits.
The Disability Insurance Trust Fund, meanwhile, will be able to pay benefits until 2057 – eight years sooner than last year’s estimates. At that time, Social Security will be able to pay 91% of those benefits.
Combined, both trust funds are estimated to be able to pay full benefits as scheduled until 2034, one year earlier than last year’s projections, at which point 78% of benefits will be payable.
Notably, last year’s projections did not take the effects of Covid-19 into account.
Though the depletion dates have been bumped up sooner, benefits will still be paid once those dates are reached.
In addition, though the cost-of-living adjustment for next year was projected to be 3.1%, that increase will likely be closer to 6% due to recent increases in the Consumer Price Index, senior administration officials said. That is in line with recent estimates.
That would be the highest increase in decades, due to recent price increases in areas like cars and energy. The COLA for this year was 1.3%.
While this report is the first to show the effects of the Covid-19 pandemic on Social Security, the full effect of persistent inflation likely will not be known until next year’s report, said Shai Akabas, director of economic policy at the Bipartisan Policy Center.
A sustained inflation rate of more than 2% could have a meaningful impact on the program’s finances, he said.
The Aug. 31 release date of the annual Social Security trustees report is also the latest in at least 25 years, Akabas noted. Typically, the report comes out in April, though it has been released later than that in the past.
“It’s concerning from that standpoint of wanting to make sure we’re keeping a close eye on the program’s finances,” Akabas said.
While the report’s results point to the need to fix the program — either through increased taxes, benefit cuts or a combination of both — it is unlikely to spur lawmakers to act immediately, Akabas said.
That’s because the estimates for the program are not as dire as projected in the immediate aftermath of the onset of Covid-19 last year. Prior to the economic recovery, the Bipartisan Policy Center had projected the trust fund used to pay retirement benefits could run out as soon as 2029 to 2033.