WASHINGTON | Tue., Apr. 24, 2012 9:26am EDT (Reuters) Aging baby boomers got some jolting news on Monday when the U.S. government said the Social Security retirement program is on track to go bankrupt three years earlier than expected if reforms are not made.
Unless federal lawmakers can decide how to put Social Security on a sound footing, retirees' pension checks would start running out in 2033, according to an annual report.
The baby boomers - those 78 million Americans born between 1946 and 1964 - started retiring last year. With 10,000 of them expected to retire every day for the next 19 years, according to the Pew Research Center, they will increasingly strain Social Security.
"Never since the 1983 reforms have we come as close to the point of trust-fund depletion as we are right now," trustee Charles Blahous told reporters. "Our window for dealing with it without substantially disruptive consequences is closing very rapidly.
Meanwhile, the Medicare health care fund for the elderly is still is headed for exhaustion in 2024, the same date estimated last year. But it was uncertain whether the assumptions used in arriving at the estimate were overly optimistic.
Blahous and fellow trustee Robert Reischauer said lawmakers should be aware that it will become increasingly difficult to "avoid adverse effects" on retirees or those close to retirement if legislative changes are delayed much longer.
For example, Americans' average real earnings are forecast to grow more slowly than previously thought, crimping revenue from the taxes that pay for the benefits, the report noted.
Even when the fund starts to run out of money in 2033, it would be able to pay 75%of benefits. An alternative, in order to keep payments at 100%, would be to raise the payroll tax on employers and employees to 16.7% from its regular 12.4% rate.
Members of Congress also have mulled raising the retirement age or cutting some benefits to the wealthy. But no action is expected before the November elections.
Trustees for the fund said a disability insurance program, which is generally lumped in with Social Security, faces the most immediate financing shortfall. It said that fund will likely be depleted in 2016, two years earlier than projected last year.
"Young people have come to wonder what would be their lot when they came to old age." That quote could have come from this latest trustees' report, given Americans' worries about the future of Social Security and Medicare.
(Reporting By Glenn Somerville and Rachelle Younglai; Editing by Richard Cowan and Eric Walsh)
© 2011 Thomson Reuters. Click for Restrictions.
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