Social Security fund could run dry ahead of earlier forecast, trustees say

The trust funds for Social Security and Medicare will run out of money in less than a decade, according to a report released Wednesday, as the programs’ trustees warned that the funds’ depletion date is significantly closer than predicted a year ago.

If Congress does not overhaul the programs’ financing, automatic cuts will slash Social Security benefits by 23 percent and Medicare hospital benefits by 11 percent in 2033, the report said.

Here’s what to know about the current state of Social Security.

Is Social Security solvent?

For today, yes. But in last year’s annual report, the trustees projected that Social Security would become insolvent by 2035 and Medicare in 2036. They now predict that Social Security’s fund will run out of money in 2033, or in 2034 if Congress changes the law to combine the separate funds for old-age benefits and for disability insurance. They also now forecast that Medicare’s hospital insurance fund will run out in 2033.

The Social Security and Medicare trust funds are separate from the federal budget and funded by a dedicated payroll tax paid by employers and employees, with each side kicking in 6.2 percent of gross wages up to a certain threshold, currently $176,100 per year. Any wages exceeding that amount are exempt from Social Security taxation.

Medicare collects an additional 1.45 percent of gross wages, bringing total deductions to 7.65 percent per worker.

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