Social Security must reduce benefits in 2034 if reforms aren’t made

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The U.S. government's healthcare program for the elderly will exhaust its reserves for hospital insurance in 2026, three years earlier than last year's forecast, the Social Security and Medicare Boards of Trustees said in a report on Tuesday. Income to the Medicare fund is expected to be lower than estimated a year ago because of "lower payroll taxes attributable to lowered wages in 2017 and lower levels of projected gross domestic product", the Treasury said in a "fact sheet" accompanying the report.

Meanwhile, higher benefit payouts mean Social Security will have to dip into its almost $3 trillion trust fund for the first time since 1982 - and trustees warned the program would be insolvent by 2034.

And for the first time since 1982, Social Security costs will exceed the money being put into it this year.

Notably, the latest report pushed back expected depletion of the disability fund reserves from 2028 to 2032.

Of the two programs, Medicare faces the greatest fiscal challenges as medical costs increase and the USA ages, with many baby boomers set to retire in the next several years.

"The programs remain secure", Treasury Secretary Steven Mnuchin said in a statement.

"Social Security and Medicare are the federal government's two largest programs, and millions of Americans heavily rely on their benefits".

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The combined Social Security trust funds are slated to run dry in 2034, and that will force benefits to be cut more than 20 percent.

"However, certain long-term issues persist", the statement added.

"The HI trust fund does not meet either the trustees' test of short-range financial adequacy or their test of long-range close actuarial balance", the report stated.

That was one of the conclusions from an annual report the trustees of the Social Security and Medicare funds released Tuesday.

Mnuchin vowed the Trump administration's efforts to cut taxes, ease federal regulations and improve trade deals would help both programs survive long term. The ratio of workers to beneficiaries fell to 3.3 in 2005 and then to 2.8 in 2016. And the number of people on Social Security is expected to climb to 91 million, from 62 million, in the same period.

Meanwhile, the trustees project that both Medicare Part B outpatient care and the Part D prescription drug program will remain adequately financed into the "indefinite future" with money from general revenues and beneficiary premiums. Medicare recipients' monthly premiums change annually based on these costs.

Information for this article was contributed by Robert Pear of The New York Times, and by Ricardo Alonso-Zaldivar and Andrew Taylor of The Associated Press.

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