By Elia Lopez
Dec 21, 2024, 1:47 PM EST
Although in 2025 there will be an increase in payments made by the Social Security Administration (SSA), it is also true that resources are being exhausted, so there is a risk that at some point the benefits are no longer paid in full to people who apply.
In early 2025, Social Security plans to increase payments. This will be thanks to the cost of living adjustment (LINEfor its acronym in English), which is calculated each year according to inflation.
So as a result, benefits for retirees, survivors, people with disabilities and those of Supplemental Security Income (SSI) will rise 2.5% next year. This means that beneficiaries will see a little relief from rising prices.
But not everything is rosy, since, in the coming years, Social Security could face serious financial problems that would put at risk the full payments currently received. Although cost-of-living adjustments are common and applied each year to prevent beneficiaries from losing purchasing power, there are concerns about the long-term financial stability of the system.
The Social Security Board of Trustees published earlier this year its annual report on the financial situation of the Social Security Trust Fundsand the news is not good. Reports indicate that if action is not taken soon, Full payments could disappear faster than expected.
When will Social Security funds run out?
According to the latest projections, the Old Age and Survivors Insurance Trust Fund (OASI), which covers the retirees and survivorswill be able to pay 100% of benefits only until 2033. After that date, once reserves are exhausted, the program will only be able to cover 79% of benefits with current revenues. In other words, the payments beneficiaries receive will be lower from that point on, unless measures are taken to resolve this crisis.
On the other hand, the Disability Insurance Trust Fund (DI), which covers people with disabilities, has a much more stable situation. According to estimates, this fund will be able to continue paying 100% of benefits until the year 2098, which gives a break to people who depend on this aid.
What is happening with Medicare?
Regarding Medicare, the Hospital Insurance Trust Fundor (HI) will be able to pay 100% of benefits until 2036. After that date, it is estimated that it will only be able to cover 89% of benefits. Fortunately, the Supplemental Health Insurance Trust Fund (SMI), which is financed through federal premiums and contributions, does not present financial problems.
How to prevent funds from running out?
Although the funds are still several years away from being completely exhausted, it is crucial that the government begins to take action to prevent this from happening. Policymakers have several options to address long-term deficits, such as increase the payroll tax rateto, raise salaries subject to Social Security contributions, increase the full retirement ageao even reduce annual cost-of-living adjustments.
The future of Social Security depends on decisions made today, so it is important that we all stay aware of how events will unfold in the coming years.
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