Medicare and Social Security retirement benefits are expected to be exhausted sooner than previously thought, a trustees’ report to Congress shows.

The Social Security trust fund for retirees is projected to become insolvent in 2033. But that cliff is expected to arrive several quarters sooner, moving from the end of 2033 to the beginning of the year.

If Congress passes a law to combine Social Security disability insurance funds with Social Security old-age funds, the combined account is expected to become depleted in 2034. That’s a year sooner than officials projected a year ago.

That doesn’t mean there won’t be any money for retirees in 2034. But it does mean retirees can only get paid based on what’s currently coming in, mainly payroll taxes on working Americans.

The trustees said they expect a 23% cut come 2033 for just Social Security retirement benefits or a 19% cut come 2034 for benefits if Congress combines the old-age and disability insurance funds. The disability insurance funds on their own aren’t projected to become depleted, at least for decades.

Trustees said the Medicare hospital insurance trust fund is on course to become exhausted by 2033, three years earlier than reported last year. If and when that happens, the trustees expect Medicare hospital benefits to be slashed by 11%.

That’s Medicare Part A, which helps cover inpatient care in hospitals, skilled nursing facility care, hospice care and home health care. The officials said that Part B of Medicare, or supplementary medical insurance, is adequately financed into the future.

Romina Boccia, director of budget and entitlement policy for the Cato Institute, a libertarian-leaning think tank, said the acceleration of Social Security’s insolvency is significant, even if it’s just by a few quarters.

She said it’s largely a self-inflicted wound by Congress for passing the Social Security Fairness Act, which she called a “fiscally irresponsible benefit increase” for public sector workers. That law sped up Social Security spending.

Boccia said she couldn’t point to a specific policy change for the acceleration of Medicare’s insolvency.She said Medicare’s looming insolvency fluctuates more, because there’s a lot of volatility in usage of medical services, hospital prices and drug prices.

Boccia is opposed to using Social Security disability insurance to prop up the old-age benefits. Different reforms are needed for the separate programs, because they serve different purposes, she said, adding that combining them only delays the inevitable.

The government calls these trust funds, but Boccia said that’s misleading.

“There’s no money in either of these funds,” she said. “These are IOUs, so I don’t like to call them funds.”

Boccia said they are intragovernmental accounting ledgers, allowing the Treasury to give money to the Social Security Administration so retirees can get their benefits.

The funding crisis that’s looming in 2033 is really just the end of the statutory borrowing authority, she said.

Until 2010, workers paid more in Social Security taxes than what the federal government paid out in benefits, she said. Since then, Social Security has borrowed more than $1 trillion to bridge the gap. The government is expected to borrow another $4 trillion to make up the Social Security deficit between now and 2033.

People are living longer and cashing Social Security checks for longer. Declining fertility rates mean there are fewer new workers to generate tax revenue for retiree benefits.

In the 1950s, there were 16 workers paying taxes for every one beneficiary of Social Security, Boccia said. Now, there are just 2.7 workers paying taxes to cover the costs of supporting a Social Security beneficiary. She said Congress needs to act.

But lawmakers are busy wrestling with President Donald Trump’s “One Big Beautiful Bill Act,” projected to add over $2.4 trillion to government deficits over 10 years because its spending cuts don’t offset its tax cuts.

Boccia said 2033 might not be a long time from now, but it’s several election cycles away. And Congress is treating Social Security and Medicare insolvency as a long-term problem.

“The worry is that they will try to kick the can down the road, which means they may authorize additional borrowing authority rather than fix the underlying financing issues,” she said.

Boccia said the unfunded obligations long-term for Social Security are now $25 trillion, compared to the entire U.S. publicly held debt of $29 trillion. She said she wants to see Congress set up an independent fiscal commission with the authority to reform Social Security. That could give lawmakers political cover for unpopular changes, she said.

“They should do that now. They should not wait until 2032,” Boccia said, adding that the challenges with reforming Social Security will only grow.

Congress is not going to make any changes that affect current beneficiaries, Boccia said. She said 40% of all federal spending benefits people 65 and older. That group votes at a higher rate than younger Americans. The younger generation could get stuck holding the bag.

“We need to worry less about the people who are in retirement or close to retirement and more about not bankrupting the next generation,” Boccia said.

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