Social Security is projected to be unable to fully pay monthly benefits to retirees and people with disabilities by 2034 unless lawmakers take action to address the impending shortfall, as per the annual report released by the program's trustees.

The combined trust funds supporting Social Security, which provide payments to the elderly, survivors, and individuals with disabilities, are expected to be depleted by 2034, a year earlier than previously estimated. By that time, payroll tax revenue and other income sources will only cover 81% of the benefits owed.

The forecast's deterioration is attributed to various factors, including a recent law that increased benefits for certain workers and the expectation that the nation's fertility rate will take longer to recover from historically low levels. The report also anticipates slower growth in average earnings over the next decade.

Medicare's financial outlook has also worsened, with its hospital insurance trust fund, Medicare Part A, projected to cover scheduled inpatient hospital benefits until 2033, down from 2036 in the previous year's report. By 2033, Medicare will only be able to pay 89% of total scheduled Part A benefits, which include hospice care, skilled nursing facility services, and home health services post-hospitalization.

The trustees attribute the earlier depletion of Medicare's trust fund to increased medical spending in 2024, which has led to higher forecasts for future expenditures. Additionally, the assumed growth rate of inpatient and hospice services in the upcoming years has been raised.