Your retirement window just got a little tighter — thanks to the pandemic.
Social Security will need to cut benefits starting in 2034, a year earlier than previously forecast, due to the COVID-19 pandemic, according to an annual government report.
The two Social Security funds that the Treasury Department oversees, the Old-Age and Survivors Insurance and the Disability Insurance Trust Funds, are designed to provide income to retired workers and to those who can’t work due to a disability.
The Old-Age and Survivors fund is now only able to pay full benefits until 2033, one year earlier than expected, the programs’ trustees said in a report Tuesday.
The Disability Insurance fund is expected to be able to pay full benefits through 2057, eight years earlier than reported last year by Treasury officials.
If the funds were to be combined, the benefits would be able to pay out as scheduled until 2034, a year earlier than previously forecasted. At that point it would only be able to pay out 78 percent of promised benefits to retirees and disabled beneficiaries, Treasury officials said.
The COVID-19 pandemic and the short recession it caused led to a drop in revenue from payroll taxes that hastened the rate at which Social Security funds are depleting, the trustees said.
They added that they project a higher mortality rate through 2023 and a delay in births in the short term.
The long-term effects of the pandemic remain unclear, the trustees said.
Medicare is still expected to exhaust its reserves in 2026, the same estimate given last year.
“Having strong Social Security and Medicare programs is essential in order to ensure a secure retirement for all Americans, especially for our most vulnerable populations,” Treasury Secretary Janet Yellen said in a statement Tuesday.
“The Biden-Harris Administration is committed to safeguarding these programs and ensuring they continue to deliver economic security and health care to older Americans,” she added.
The Social Security and Medicare funds are widely seen as crucial pillars of American society.
For generations, Americans have contributed to the funds by way of payroll taxes under the assumption that the funds would provide a crucial source of income during retirement.
But for years now, the costs of the current monthly payments to retirees have exceeded the income it gets from US workers as the generation of baby boomers hits retirement age.
If nothing is done by the 2034 date at which the Treasury says the program’s reserve fund would be depleted, the more than 20 percent cut in benefits to retirees could prove disastrous for millions of Americans who rely on those payouts.