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

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Medicare will run out of money sooner than expected, the government announced Tuesday.

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.

The DI trust fund, on the other hand, is projected to be exhausted in 2032, extended from last year's estimate of 2028. Medicare provides health insurance for about 60 million people, most of whom are age 65 or older.

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

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The report from program trustees says Medicare will become insolvent in 2026, three years earlier than previously forecast.

While costs have exceeded net income since 2010, this is the first time in more than three decades that spending is expected to outweigh total income, by about $2 billion, meaning asset reserves will decline.

"The administration's economic agenda - tax cuts, regulatory reform and improved trade agreements - will generate the long-term growth needed to help secure these programs", Treasury Secretary Steven Mnuchin said Tuesday.

Social Security covers 62 million people, split among retired workers and their dependents, survivors of workers who've died and disabled people. And the trustees now say that program is going to be insolvent in 2026 - or roughly the same time as we are from the passage of Obamacare.

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President Donald Trump campaigned on a promise not to cut Social Security or Medicare, but he hasn't offered a blueprint for either program. Advocates for the elderly said today there should be no cuts to Social Security benefits.

Rather than cutting benefits, the Democratic-leaning Social Security Works coalition supports expanding benefits as a solution to the nation's looming retirement crisis by asking the wealthy to contribute more.

In principle, the U.S.is supposed to be paying forward its Social Security and Medicare obligations by building up trust funds to cover future costs.

"As in past years, the trustees have determined that the fund is not adequately financed over the next 10 years", the report said, citing in part lower payroll taxes collected on lowered wages in 2017 and rising hospital spending.

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