The trustees who oversee the Social Security and Medicare trust funds have released new projections outlining the financial health of those programs and how long they are expected to cover payments to recipients.

According to the report released Friday, the Social Security trust funds — which, when combined, include benefits paid to retired workers and their survivors and benefits paid to disabled workers — are expected to be depleted in 2034, one year sooner than previously anticipated.

The report cites “significant financing issues” for the shortfall. Social Security has been running at a loss since 2010, but the financial picture has worsened in recent years. A key indicator of that can be found in the ongoing wave of retirements among baby boomers, which is projected to increase faster than the number of covered workers who pay into the Social Security fund through their income taxes.

“The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust to them,” their report states.

Medicare trust fund outlook improves

On the other hand, the main reserve for Medicare, the Hospital Insurance trust fund, is now expected to cover 100% of beneficiaries for three years longer than previously expected. That's because of an increase in the number of covered workers who contribute to the fund through taxes taken out of their paychecks, and higher projected wages.

Additionally, the updated expectations for health care spending following the Covid-19 pandemic and the ability to negotiate prescription drug prices are having a positive effect on Medicare trust fund reserves. 

Despite this, Medicare trustees say the fund "still faces a substantial financial shortfall that will need to be addressed with further legislation.”

The Biden administration is in the process of trying to promote a $6.8 trillion budget. In it, he proposes raising taxes on higher-earning Americans to cover projected shortfalls.

“Social Security and Medicare are two bedrock programs that older American[s] rely upon for their retirement security,” Treasury Secretary Janet Yellen said in a statement.