Social Security & Medicare: Securing Our Future

By Darius Spearman (africanelements)

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Understanding the “Go-Broke” Dates

For many years, the talk about Social Security and Medicare running out of money has been a constant hum in the background. Now, the projected “go-broke” dates for these vital programs have moved even closer. Social Security is now projected to reach this point in 2034, and Medicare in 2033 (AP News). This news can cause significant worry, especially within Black communities, where these programs often represent a crucial safety net for families and elders.

It is important to understand what “go-broke” truly means. This term does not mean that benefits will stop entirely. Instead, it signifies that the programs’ trust fund reserves are projected to be depleted (Center on Budget and Policy Priorities). Once these reserves are gone, Social Security and Medicare will only be able to pay out benefits based on the incoming payroll tax revenues. This would result in a significant reduction in benefits for all beneficiaries (CRFB). For example, Social Security would only be able to pay approximately 83 percent of promised benefits (AP News), and Medicare would cover only 89 percent of costs for hospital visits, hospice care, and nursing home stays.

Social Security’s Core Components

Social Security is not a single, monolithic entity. It operates through two main trust funds: the Old-Age and Survivors Insurance (OASI) trust fund and the Disability Insurance (DI) trust fund (SSA Trustees Report Summary). The OASI fund primarily pays retirement and survivors’ benefits, which are crucial for many older adults and families who have lost a breadwinner. The DI fund, often referred to as Social Security Disability Insurance (SSDI), pays benefits to disabled workers and their families, providing essential support for those unable to work due to severe health conditions.

While these two funds are legally separate, they are often discussed together as the combined OASDI trust funds. The OASI trust fund alone is projected to be depleted by 2033 (CRFB). However, the DI trust fund currently has enough money to pay benefits for the full 75-year projection period (Boston College Center for Retirement Research). The combined OASDI trust fund reserves are projected to be depleted in 2035 (Center on Budget and Policy Priorities). This distinction is important because it highlights that the challenges are more immediate for retirement and survivor benefits.

The Trust Funds: What They Are and How They Work

The idea of a “surplus fund” or “trust fund reserves” can be confusing. Simply put, Social Security’s trust funds are like savings accounts. They hold money that has been collected from payroll taxes over the years that exceeded what was needed for immediate benefit payments and administrative costs (SSA Trustees Report Summary). These accumulated savings are not just sitting in a vault; they are invested in special interest-bearing U.S. Treasury securities. This means the money is loaned to the U.S. government, earning interest, and is considered a safe investment.

When current payroll taxes are not enough to cover the benefits due, these reserves are drawn upon to make up the difference. Social Security has accumulated a significant amount, about $2.8 trillion, in trust fund reserves over the past three decades (Center on Budget and Policy Priorities). However, due to increased longevity and a decrease in the number of workers paying into the system compared to the number of people receiving benefits, Social Security began tapping into its surplus fund in 2021 to meet its obligations (Alliance for America’s Future). Depletion means these accumulated savings are exhausted, and the program must rely solely on incoming taxes.

Understanding Benefit Reductions

The percentages mentioned for benefit reductions, such as 17 percent for Social Security or 11 percent for Medicare, represent the immediate, across-the-board cuts that would happen if the trust funds are depleted and Congress does not act (CRFB). These numbers are calculated based on the projected gap between the money coming in from payroll taxes and the amount needed to pay full benefits. For beneficiaries, this would mean a direct and significant decrease in their monthly payments. For the combined OASDI trust funds, a 17 percent cut is projected (CRFB).

If the OASI trust fund alone is depleted in 2033, the projected benefit cut would be even higher, at 21 percent (CRFB). This reduction would affect all beneficiary groups equally, meaning retirees, disabled individuals, and survivors would all see their monthly payments reduced by the same percentage (CRFB). For many, especially within Black communities where Social Security often represents a primary source of income in retirement, such a cut could be devastating. It could push more individuals and families into poverty or near-poverty, making it harder to afford basic necessities like housing, food, and healthcare.

Growing Reliance on Social Security

A significant and concerning trend is the increasing reliance of older adults on Social Security as their primary source of retirement income. In 2014, 13 percent of adults aged 50 and older reported having no source of retirement income other than Social Security. That number has now climbed to 21 percent (Nationwide News). This means a growing number of our elders are depending almost entirely on these benefits to make ends meet.

Furthermore, the landscape of retirement savings has changed dramatically. A decade ago, nearly half of Americans (48 percent) had a pension in addition to Social Security. By 2023, that figure dropped significantly to just 31 percent (Nationwide News). This decline in traditional pensions, coupled with often inadequate personal savings, places an even greater burden on Social Security to provide financial stability for retirees. As a result, more people are seeking professional advice on how and when to file for Social Security benefits, with 53 percent of adults reporting their financial professional provides such advice, up from 35 percent in 2014 (Nationwide News).

Funding Challenges and Demographics

The financial health of Social Security and Medicare relies heavily on payroll taxes (Alliance for America’s Future). These are taxes deducted directly from workers’ paychecks, with employers also contributing. This system works best when there is a healthy ratio of workers paying in for each person receiving benefits. However, this worker-to-beneficiary ratio has been declining. Due to increased longevity, meaning people are living longer, and a decrease in birth rates, there are fewer workers contributing for each retiree or disabled person receiving benefits (Alliance for America’s Future).

This demographic shift is a major contributor to the current financial challenges. When the system was designed, there were many more workers for every beneficiary. Now, with longer lifespans and smaller families, that balance has shifted, putting a strain on the trust funds. This means that the money coming in from payroll taxes is no longer sufficient to cover the full cost of benefits, necessitating the use of accumulated reserves. This trend highlights the urgency of finding sustainable solutions to ensure the programs remain viable for future generations.

The Urgency of Legislative Action

The need for legislative action to address the long-term financial challenges of Social Security and Medicare cannot be overstated. The current projections indicate that Medicare still faces a substantial financial shortfall that requires further legislation (BlackAmericaWeb). The same holds true for Social Security. While the combined OASDI trust funds are projected to be depleted in 2035, the OASI fund, which covers most beneficiaries, is projected to be depleted even sooner, in 2033 (Boston College Center for Retirement Research).

Delaying action means that any necessary adjustments, whether through increasing revenue or modifying benefits, will need to be larger and potentially more disruptive (Boston College Center for Retirement Research). The longer policymakers wait, the fewer options may be available, and the more drastic the changes might need to be to ensure the program’s long-term solvency. For example, options like investing a portion of the trust fund in equities become impossible as the trust fund approaches zero (Boston College Center for Retirement Research). This urgency is especially critical for Black communities, who often rely more heavily on these benefits and would be disproportionately affected by any cuts or delays in finding solutions.

Public Concern and Future Outlook

A significant number of Americans, particularly younger adults, are deeply concerned about the future availability of Social Security and Medicare benefits (Gallup News). While older Americans generally express more confidence, younger generations often feel that these programs will not be there for them when they need them (AP News). This sentiment is understandable, given the shifting “go-broke” dates and the lack of concrete legislative solutions. Many adults, especially those under 65, view Medicare as “extremely important” or “important” for their later years, with 87 percent holding this view (Gallup News).

The concern is so widespread that nearly six in ten Americans report they are more likely to support a political candidate who prioritizes issues affecting older Americans (Gallup News). This sentiment is strongest among those aged 65 and above, with 77 percent sharing this view. The majority of U.S. adults believe Social Security benefits will “dry up” in their lifetime (Nationwide News). This widespread anxiety underscores the need for transparent discussions and decisive action from lawmakers to restore public confidence and ensure the long-term viability of these essential programs for all Americans, including those in the African Diaspora who have historically faced economic disparities and rely heavily on these benefits for stability.

ABOUT THE AUTHOR

Darius Spearman has been a professor of Black Studies at San Diego City College since 2007. He is the author of several books, including Between The Color Lines: A History of African Americans on the California Frontier Through 1890. You can visit Darius online at africanelements.org.