A Social Security trust fund is projected to face a funding shortfall in 2032, the Social Security Trustees' report released Tuesday warned.
The trust fund helps pay Social Security benefits for more than 60 million retirees and family members.
Unless Congress acts by then, seniors will see an automatic cut in their monthly benefits of 22%, the report said.
"The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way to phase in necessary changes gradually and give workers and beneficiaries time to adjust," the report said.
The forecast shows the trust fund will be exhausted a year earlier than was predicted last year and cited a falling birth rate, reduced immigration and the tax cut passed by the Republican Congress last year as factors, partially offset by stronger productivity gains. Rising healthcare costs and government spending also contributed to the projected depletion date being less than 10 years away, the report said.
"The basic challenge for Social Security is demographic. Baby boomers are retiring at a rapid pace, and there are fewer younger workers paying into the system for every senior collecting monthly benefits," the report said.
Congress could patch the shortfall by raising taxes, reducing benefits or some combination of the two, the report said.
"Nationally, the average monthly cut would total $500, which is more than what the average retired household spends on groceries each month," the Committee for a Responsible Federal Budget said.
The trustees' report also said Medicare’s hospital insurance trust fund will be unable to pay full benefits in 2033, and that Social Security’s combined trust funds, which cover old-age and disability recipients, will be unable to pay full benefits beginning in 2034; after that incoming revenue would cover about 83% of scheduled benefits, the report said.
The trustees, who include the treasury secretary, labor secretary, health and human services secretary and the Social Security commissioner, said the latest findings show the urgency of needed changes to the programs. Social Security Commissioner Frank Bisignano said the Trump administration is "committed to protecting and strengthening Social Security" and "eliminating waste, fraud, abuse and ensuring program integrity." AARP CEO Myechia Minter-Jordan said the latest numbers "should be a wake-up call. Congress needs to act."
About 70.1 million people are enrolled in Medicare. The report noted Social Security benefits were last reformed roughly 40 years ago when the federal government raised the eligibility age for the program from 65 to 67, and that the eligibility age of 65 has never changed for Medicare.