When it comes to Social Security, Treasury obtains cash to pay benefits by borrowing from the public. But since the nation hit its $31.4 trillion debt ceiling, it cannot add to its borrowing until Congress addresses the cap. Since the US takes in less revenue than it needs to pay its bills, Treasury must borrow to cover all its obligations. Though it’s not known exactly how the Treasury Department will handle making payments with the funds it has on hand, the agency may ultimately decide to prioritize Social Security benefits – though likely after it has paid interest and principal on the nation’s debt.Īlso, it’s possible the Treasury Department could continue making on-time payments because of the entitlement program’s trust fund, said Shai Akabas, director of economic policy at the Bipartisan Policy Center.
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It is possible that Social Security beneficiaries could be shielded somewhat from the full impact of the US defaulting on its obligations. “I am very, very concerned about what this will do to our financial industry, as well as to our benefits,” she said. Many are not only concerned about their benefits, but also that a potential stock market drop triggered by a default could decimate their retirement savings. Older Americans are more aware of the debt ceiling battle – and the potential delay in payments – this time than they were during the last major standoff in 2011, thanks to the internet, said Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League. He has tried to reassure folks that they will receive their full benefits eventually. “If you depend on your Social Security for most of your living expenses, you’re not going to be able to pay your rent, buy your food, pay your utilities, the basics … pay out-of-pocket health care costs that may come up.” “A lot of people in Washington are not that in tune with what this could mean,” he said. But that’s not possible for many recipients. Max Richtman, the committee’s CEO, has been telling members to try to set aside some money to have a little cushion if their June benefits don’t arrive on time. The average benefit for retired workers is $1,827 a month in 2023. Many senior citizens are already growing worried, especially in the past week or so as the deadline grows closer, advocates say.Īlmost two-thirds of beneficiaries rely on Social Security for half of their income, and for 40% of recipients, the payments constitute at least 90% of their income, according to the National Committee to Preserve Social Security and Medicare.
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If US defaults on its debt, Treasury would have to decide how to pay the bills.
Five ways a debt default could affect you.
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