Social Security to Run Out of Money Sooner Than Expected

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Barron's 01 September, 2021 - 07:08am 5 views

Is Social Security going to run out?

Thanks to the economic impact of the Covid-19 pandemic last year, the Social Security trust fund will run out of money by 2034, according to an annual government report published Tuesday. That is one year sooner than was expected last year. Barron'sSocial Security to Run Out of Money Sooner Than Expected

When can you collect Social Security?

You can start your retirement benefit at any point from age 62 up until age 70, and your benefit will be higher the longer you delay starting it. This adjustment is usually permanent: it sets the base for the benefits you'll get for the rest of your life. ssa.govWhen to Start Receiving Retirement Benefits 2021

One way to address the wealth gap: Stop 'MacGyvering' Social Security | TheHill

The Hill 02 September, 2021 - 09:10am

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Chief actuary warns cutting payroll taxes could permanently deplete Social Security; White House economic adviser Larry Kudlow reacts.

The primary Social Security trust fund for retirees will run out of money in 2033, one year earlier than previously estimated, according to an annual report released Tuesday.

The Old-Age and Survivors Insurance (OASI) Trust Fund, which provides benefits for retirees, will run out of money by the end of 2033, according to the report. Tax revenue will cover just 76% of its scheduled benefits after that year. The Disability Insurance (DI) Trust Fund, which provides disability benefits, is funded through 2057, eight years earlier than last year’s projection. 

While the OASI and DI trust funds are administered separately, the trustees said a hypothetical combined Social Security fund would only be able to make payments until 2034, one year earlier than previously expected. The government would be able to cover just 78% of scheduled benefits.

Medicare will run out of its current funding by 2026, matching previous estimates.

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The Social Security and Medicare Boards of Trustees said they altered forecasts to account for the impact of the COVID-19 pandemic and corresponding financial downturn, which hurt payroll and income tax revenues utilized to fund the programs.

"The finances of both programs have been significantly affected by the pandemic and the recession of 2020," the trustees said regarding Social Security and Medicare.

Members of the Social Security and Medicare Boards of Trustees include Treasury Secretary Janet Yellen, Labor Secretary Marty Walsh, Health and Human Services Secretary Xavier Becerra and Acting Social Security Commissioner Kilolo Kijakazi.

AARP CEO Jo Ann Jenkins issued the following statement in response to the Medicare and Social Security Trustees’ reports released today:

Experts have long projected a shortfall in Social Security and Medicare benefits without intervention from Congress.

"At this time, there is no consensus on what the lasting effects of the COVID-19 pandemic on the long-term experience might be, if any," the report added. "The Trustees will continue to monitor developments and modify the projections in later reports."

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Social Security, on surprisingly solid ground

New York Daily News 02 September, 2021 - 09:10am

According to the 2021 report, Social Security currently costs around 5% of gross domestic product. At the end of the 21st century, that rises by only about one percentage point to 6% of GDP. Nearly all other industrial capitalist nations, right now, today, devote a larger percentage of GDP — with Germany, France and Portugal spending about 11% — to fund their retirement, survivors and disability systems. At a time when the age 65-and-over population is continuing to grow numerically and as a percent of the United States — from 54 million in 2019 (16.5% of the United States population) to an estimated 81 million in 2040 (22%) and 94 million in 2060 (23%) — that small increase in GDP is more than justified.

The report shows that Social Security’s earned benefits can be paid in full until 2034. Even if Congress does absolutely nothing during the next 75 years, the program would be able to pay around 78 cents of every benefit dollar earned by the American people.

Of course, that’s not acceptable. Fortunately, Congress has more than a decade to act. And it will, as past Congresses always have. That’s just political reality. No one would want to be in Congress fielding the anger of Social Security beneficiaries whose benefits were cut.

What the report does not show is the retirement income crisis that is facing working Americans, whereas many as two-thirds will be unable to maintain their standards of living in retirement. It does not show the crisis because its focus is Social Security, not the disappearance of traditional employer-sponsored pensions and the inadequacy of 401(k)s.

The report also does not explicitly show that, as the Washington Post reports, wealth concentration has returned “to levels last seen during the Roaring Twenties.” It does not show that the “400 richest Americans now own more than the bottom 150 million” or that the pandemic is worsening this problem.

The enactment of Social Security helped to end the rampant wealth inequality of the 1920s and before. It helped to usher in a strong middle class. It can do so again, if benefits are increased and the wealthy are asked to pay their fair share.

In light of Social Security’s near universality, security, portability, fairness and popularity, expanding the system is the best and arguably, the only solution to the retirement income crisis. Its benefits can be raised with no startup costs and no disruptions. And they should be.

Also not shown in the Trustees Report is the absence of national paid family and medical leave, which would greatly expand the economic security of American families. Nor does the report cover how the health, well-being and finances of so many Americans have been upended by our inadequate and inequitable health care system.

Paid leave was contemplated when Social Security was enacted in 1935. So was universal, government-sponsored health care. But, excepting modest public health and maternal and child health programs, access to adequate health care was postponed. To be sure there has been progress — Medicare and Medicaid in 1965 and the Affordable Care Act in 2010 — but clearly not enough.

The tide appears to be turning. The pandemic and its economic consequences give new urgency and momentum to calls to expand health-security protections. President Biden’s agenda includes expansions of Medicare as well as paid family and medical leave. Public support for those improvements is large and growing.

Yes, it is time to expand Social Security, adding protections and substantially increasing benefit amounts, while requiring the wealthiest to pay more. The American people need and deserve more Social Security to protect against lost wages arising from disability, retirement, giving care to family members, illness, death and more. The richest nation in the history of the world can afford to do no less. The well-being of working Americans, families and future generations requires no less.

Copyright © 2021, New York Daily News

Report: Social Security to run out of money sooner than expected

KARE 11 02 September, 2021 - 09:10am

The decision by the European Council to remove the U.S. from a safe list of countries for nonessential travel reverse advice that it gave in June, when the bloc recommended lifting restrictions on U.S. travelers before the summer tourism season.

The guidance is nonbinding, however, and U.S. travelers should expect a mishmash of travel rules across the continent.

The EU also removed Israel, Kosovo, Lebanon, Montenegro and North Macedonia from the list.

The EU has no unified COVID-19 tourism policy and national EU governments have the authority to decide whether they keep their borders open to U.S. tourists. Possible restrictions could include quarantines, further testing requirements upon arrival or even a total ban on all nonessential travel from the U.S.

More than 15 million Americans a year visited Europe before the coronavirus crisis, and new travel restrictions could cost Europe billions.

The recommendation doesn't apply to Britain, which formally left the EU at the beginning of the year and opened its borders to fully vaccinated travelers from the U.S. earlier this month.

The United States remains on Britain's "amber" travel list, meaning that fully vaccinated adults arriving from the U.S. to the U.K. don't have to self-isolate. A COVID-19 test is required three days before arrival in the U.K. and another test is needed two days after arriving.

Meanwhile, the United States has yet to reopen its own borders to EU tourists, despite calls from the bloc for the Biden administration to lift its ban. Adalbert Jahnz, the European Commission spokesperson for home affairs, said Monday that the EU's executive arm remained in discussions with the U.S. administration as both sides have so far failed to find a reciprocal approach.

In addition to the epidemiological criteria used to determine the countries for which restrictions should be lifted, the European Council said that "reciprocity should also be taken into account on a case by case basis."

The European Council updates the safe travel list based on criteria relating to coronavirus infection levels. It gets reviewed every two weeks. The threshold for being on the EU list is having not more than 75 new COVID-19 cases per 100,000 inhabitants over the last 14 days.

Last week in the U.S. new coronavirus cases averaged over 152,000 a day, turning the clock back to the end of January, and the number of hospitalized COVID-19 patients was around 85,000, a number not seen since early February.

U.S. coronavirus deaths have been over 1,200 a day for several days, seven times higher than they were in early July.

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Medicare and Social Security are still in trouble | TheHill

The Hill 02 September, 2021 - 09:10am

Legal experts say it’s not yet clear how the high court will act on the long-standing protections for abortion that it plans to reconsider later this year.

By ALICE MIRANDA OLLSTEIN and JOSH GERSTEIN

Legal experts say it’s not yet clear how the high court will act on the long-standing protections for abortion that it plans to reconsider later this year, when it takes up a direct challenge to the landmark ruling.

The first-of-its-kind Texas statute empowers private citizens, rather than the government, to enforce a ban on abortion after six weeks and bring lawsuits against health providers or anyone who assists someone in obtaining an abortion. The unique enforcement mechanism makes it harder for clinics or other potential challengers to establish standing in court, or find a single target to sue.

“It is evidence tending to show the court is inclined to substantially cut back or overturn Roe, but it’s not conclusive evidence,” Cornell University law professor Michael Dorf said of the justices' refusal early Wednesday to act on a petition to freeze the Texas law.

The court's silence is difficult to interpret, given how different the case is from many other recent abortion battles. The case may well be snagged over technical and procedural issues, rather than because of something directly related to the court’s interpretation of Roe v. Wade, lawyers said.

“That the court wasn’t able to sort this through late at night doesn’t really say much,” said Ed Whelan, a senior fellow at the conservative Ethics and Public Policy Center, arguing that it’s not an indicator of what will happen when the justices review Mississippi's 15-week abortion ban in a case, Dobbs v. Jackson Women's Health Organization, that's expected to decide the fate of Roe this fall. “I don’t think this issue will have any particular impact on what the court does in Dobbs,” he said.

By ALICE MIRANDA OLLSTEIN

Unlike six-week abortion bans passed in more than a dozen states that have all been blocked by courts, Texas’ law has so far survived judicial challenges because it made the public the enforcer instead of state. People who successfully bring suits will win $10,000 in damages, and litigation can be brought against people other than the patient, such as a friend who lends money to pay for an abortion or provides a ride to a clinic.

“Anyone perceived to be aiding and abetting an abortion now has a bounty on their head,” said Planned Parenthood President Alexis McGill Johnson.The state is empowering vigilantes to enforce a bad law.”

Defendants in the challenge to the law brought by Texas abortion providers include a county judge and clerk who would handle suits brought by private citizens. But preemptive litigation against judges is seldom allowed because of immunity Congress has bestowed.

“There’s a sort of evil genius about structuring the law this way because it involves all sorts of complicated procedural obstacles to getting relief,” Dorf said.

The patient getting the abortion cannot be sued. Neither can individuals who refer a patient to an abortion provider in another state, or help the patient make the journey. But the lawyers representing the clinics say it still will have a chilling effect on physicians who'll be more reluctant to do the procedure and patients fearful to seek one even prior to six weeks of pregnancy.

“It creates a situation in which, even if the defendants were to win every single case, the burden of having to defend themselves, of getting attorneys, of having to go to around to rural courts across Texas’ 258 counties — that alone threatens to stop the provision of abortion across the state," said Marc Hearron, a senior counsel with the Center for Reproductive Rights and the lead attorney behind the challenge.

Hearron also argues that the law has baked in incentives for people to file frivolous lawsuits, with no financial penalties if they fail to prove an illegal abortion was performed but a minimum $10,000 reward if they succeed.

“The way the Texas Legislature structured this law was to entice as many lawsuits as possible and make it essentially risk-free,” he said.

The ACLU, one of the lead groups challenging the law, said they are not yet aware of any suits filed in the state.

For now, advocates are keeping their eyes on both what the Supreme Court does next and how quickly other states copy Texas’ strategy.

While the justices could still freeze the Texas law to allow legal challenges to play out, abortion opponents seem emboldened.

“This is an innovative idea that puts the power of this issue back where it belongs, with ‘We the People,’” said Kristan Hawkins, the leader of the group Students for Life Action, which lobbies in dozens of state capitals. “We are looking at this as a tool in future model legislation.”

Abortion rights groups that monitor state policy expect Arizona, South Carolina and Ohio to be among the first states to replicate the law, but say others that have previously passed six-week bans — including Kentucky, Mississippi, Alabama, Arkansas and North Dakota — may follow.

Although the Texas law is novel, in 1997, Louisiana legislators passed a measure giving women who undergo abortions the right to file civil suits against their abortion providers for unlimited damages stemming from the procedure.

A federal judge blocked that statute and a 5th Circuit Court of Appeals panel upheld the injunction. But in 2001, the appeals court ruled 2-1 that the suit used to mount the challenge was unconstitutional because the named defendants — Louisiana’s governor and attorney general — weren't involved in enforcing the law and had immunity under the 11th Amendment.

The Texas statute is even broader, since it sanctions enforcement by essentially anyone — an approach sometimes called “private attorneys general.” Such laws have been around for centuries but grew in popularity in some liberal circles in the late 1990s and early 2000s as a means of beefing up enforcement of environmental and labor statutes.

“This mechanism does not inherently have an ideological basis,” Dorf said. “In those contexts, it was not so much an effort to prevent potential targets of the law from bringing an anticipatory lawsuit, but an attempt to bring private sector resources to bear.”

Hearron and other attorneys representing clinics warn that if the Texas law holds up in court, other states could use the same strategy on a host of issues other than abortion — from Covid precautions to restrictions on protests.

“If a state can simply outsource its enforcement authority to private citizens and deputize them to sue people for simply exercising a fundamental right, then that would allow any state to attack any individual right,” he said. “You can spin out hypothetical after hypothetical. So everyone from all sides ought to be extremely concerned and hope that Texas’ cynical structure for this law fails."

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Social Security facing depletion

FOX59 News 02 September, 2021 - 09:10am

Social Security retirement benefits could see big hike in 2022: What to know

Detroit Free Press 02 September, 2021 - 05:00am

Social Security retirement benefits are turning into one hot topic as we're hearing more buzz about a future hefty cost of living adjustment next year. 

The cost of living adjustment, known as COLA, was a mere 1.3% in 2021 — raising the average benefit by about $21 for monthly payments and making it one of the lowest increases on record since 1975 when Social Security started automatic annual cost-of-living allowances.

Some retirees could be looking at an extra $100 a month, based on an average Social Security retirement monthly payment of $1,655.71 in July. 

We won't know the official cost of living adjustment for 2022 until the Social Security Administration makes that announcement in October. The percentage is determined after the U.S. Bureau of Labor Statistics releases the September Consumer Price Index. 

Right now, it looks like the cost-of-living adjustment is going to be around 6.2%, according to the Senior Citizens League, a nonpartisan group dedicated to protecting and strengthening Social Security benefits. 

As a result, the group said, the index is more heavily weighted for gasoline prices, which went up 41.8% in the past 12 months. 

A potential 6% bump is pretty unusual after low inflation. But there have been other years of high COLA increases. 

By comparison, other sizable inflation-adjustments for Social Security included: 5.8% for payments in 2009, 5.4% in 1991, 7.4% in 1982 and 11.2% in 1981. The largest increase was 14.3% in 1980, according to Social Security data.

If you're thinking about retiring, an estimated 6% COLA hike might tempt you to throw in the towel at work and claim Social Security benefits at 62. But here’s why you don’t want to do that.

Mary Beth Franklin, a renowned author specializing in unraveling Social Security intricacies, says she has heard some financial planners wonder whether it's a good time to claim benefits now to lock in that eye-catching cost-of-living adjustment.

And she uncovered something most people don't know. 

Her take is that anyone who is age 62 or older in 2022 and who is eligible for Social Security will profit from next year’s COLA — even if they have not yet filed for benefits.

If there are future inflation adjustments, she noted, those who are 62 and older would see inflation adjustments baked into future payments each year until they claim benefits all the way up to when they reach age 70. 

She points out that the Social Security Administration notes: "You’re eligible for cost-of-living benefit increases starting with the year you become age 62. This is true even if you don’t get benefits until your full retirement age or even age 70."

You can begin to receive Social Security benefits as early as age 62, but you're getting a far lower monthly payout if you claim benefits long before reaching a full retirement age. 

Anyone who was born in 1960 or later has a full retirement age of 67. (If you were born on Jan.1, you'd refer to the previous year.)

Once that full retirement age was 65. But it has been gradually moving higher.

It moved to age 66 for those born in 1943 to 1954. It jumps to 66 and two months for those born in 1955 and after. It gradually climbs upward by two-month increments and it hits 66 years old and 10 months for those born in 1959. 

The Social Security Administration said it adds cost-of-living increases to your benefit beginning with the year you reach 62. And benefits then could be adjusted each year to reflect any increase in the cost-of-living as measured by the Consumer Price Index.

The cost-of-living adjustment will, of course, provide extra cash for retirees and seniors who are already collecting Social Security retirement benefits. 

But Franklin also warns that retirees age 65 and older need to watch out for premium hikes for Medicare Part B, which are expected to rise in 2022 and could erode some of the COLA increases in Social Security.  

Part B covers outpatient and diagnostic services. Its monthly premium, which is deducted from Social Security benefits, changes on a yearly basis. Franklin said the amount of the premium increase would be known in November. 

In Michigan, there were nearly 1.54 million people receiving Social Security retirement benefits as of December 2020, the most recent information available.

Michigan's state population as of April 1, 2020, was at 10,077,331 people.

Laurence Kotlikoff, professor of economics at Boston University, said he's quite concerned that inflation will continue to be higher in the years ahead.

If inflation continues, he said, many people are better off waiting to take Social Security past age 62 so that they ensure a larger share of their old age income is inflation-protected.  

Kotlikoff said even without the concerns of inflation, waiting to take Social Security closer to age 70 is the "best move by a mile for roughly three quarters of households."

He said the the inflation-adjusted benefit at 70 is 76% higher than at age 62.  

If prices are going up, he said, waiting to take Social Security closer to full retirement age offers a roughly 7.6% hedge for each year you wait. 

Kotlikoff, co-author of "Get What’s Yours — the Secrets to Maxing Out Your Social Security Benefits," notes that people can tend to live longer than they'd expect and delaying claiming Social Security benefits for as long as possible can be both a hedge against inflation and longevity. 

Social Security to Run Out of Money Sooner Than Expected

The Motley Fool 31 August, 2021 - 05:36pm

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Thanks to the economic impact of the Covid-19 pandemic last year, the Social Security trust fund will run out of money by 2034, according to an annual government report published Tuesday. That is one year sooner than was expected last year. 

While the pandemic has clearly taken a toll on the financial health of the program, the numbers aren’t nearly as bad as many forecasters originally feared. 

On the one hand, the pandemic-triggered lockdowns have led to widespread business closures and layoffs, which have significantly reduced the tax revenue from payrolls, the program’s main source of income. The Covid-19 virus has also left many survivors with damaged health that would require long-term care and thus lift costs to the Social Security program

On the other hand, the pandemic has led to the deaths of some of the most vulnerable Americans, such as people of old age or with underlying health conditions. That could reduce the costs to the program, which will now pay for a theoretically healthier group of beneficiaries.  The pandemic will likely lead to higher mortality rates through at least 2023, estimates the trustees for the Social Security trust fund.

There are many other factors at play. A wave of baby boomers is expected to retire in the next two decades, boosting the number of beneficiaries. The Covid-19 pandemic will also likely have a negative impact on immigrant numbers and the already-low birthrates––both factors could weigh on the labor force growth and economic output and hurt Social Security revenue.

What’s more, higher inflation this year will significantly boost the payout next year. The trustees estimate that Social Security beneficiaries could see a nearly 6% increase in cost-of-living, the highest annual benefit increase since 2008. The cost-of-living adjustment was only 1.3% in 2021 and 1.6% in 2020, by comparison.

The Social Security fund is expected to pay out more benefits than it receives in revenue in 2021, according to the report. The fund had more revenue than costs in at least the past five years.

The fund’s retirement program will be able to pay full benefits on a timely basis until 2033. After the reserves are exhausted, it would have enough income to pay about 76% of scheduled benefits unless Congress steps in to fund the program. The pay ratio could further decline if the program doesn’t have enough income to offset its payments.

The fund’s disability program, meanwhile, is estimated to run out in 2057, eight years earlier than last year’s projection. The deadline change is mostly due to the significantly declined revenue anticipation in the near term, while the benefit payouts remain the same, according to the report. 

Write to Evie Liu at evie.liu@barrons.com

Thanks to the economic impact of the Covid-19 pandemic last year, the Social Security trust fund will run out of money by 2034, according to an annual government report published Tuesday.

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