The Future of Medicare and Social Security

The Future of Medicare and Social Security:   We have all heard the dire predictions the Medicare and Social Security programs will go bankrupt, before some of us get to receive retirement benefits. After paying all that money into the Social Security system for 30 or 40 years, people are understandably upset at that prospect.

Medicare Enrollment FormOn the flip side, some people tell us there is nothing to worry about with these programs. They say that Congress will pass the funding measures necessary to keep Medicare and Social Security afloat. Since millions of Americans do not save enough to live on in retirement without a monthly Social Security retirement check, there is a great deal of anxiety swirling around this issue. The 2019 trustees reports provide some insight about the future of Medicare and Social Security.

First, the Good News

It might be stretching things a bit to characterize the following as good news. The trustees of these programs stated the Medicare and Social Security programs are strong right now. These programs can pay their financial obligations for the time being. Things have also not gotten any worse in the last year. The programs have nearly $3 trillion in trust funds.

Now, for the Not-So-Good News

The trustees urged Congress to pass legislation to address the financial challenges that many predict for these programs down the road. In 2020, the amount the Social Security program pays out in disability and retirement benefits will exceed its annual income. The Social Security Administration (SSA) will have to use some of its trust funds to pay out benefits. The SSA has not had to do that since 1982.

Some lawmakers suggest reducing the amount of benefits and making people work longer before they can start collecting benefits. Full retirement age used to be at 65, but Congress extended full retirement for some people to age 67. A person’s full retirement age now depends on when they were born.

One justification people give for making people work longer before collecting benefits, is the average life expectancy for Americans is longer than it was when Congress created Social Security and Medicaid. A person might only expect to live for five to ten years after retiring at age 65 several decades ago. Many people now live well into their eighties and nineties and even into the triple digits.

A person would be less likely to run out of money, if they delayed when they stop working. If working an extra year could save the Social Security system, many people see that option as an acceptable trade-off to not having any benefits when they want to retire.

The trustees urged Congress to pass legislation now to make changes to save Social Security and Medicare. By addressing the problems now, lawmakers could phase in changes gradually over time. Of course, politically, Social Security and Medicare are dangerous subjects. Older Americans are active in the political process. Many politicians are afraid of not getting elected, if they “mess with” these programs.

Possible Scenarios If Congress Takes No Action

The trustees warned that the Social Security system – both the disability program and the retirement program – will be depleted in 2035, unless Congress takes action in time. “Depleted” does not mean out of money. The SSA will still be able to pay 80 percent of scheduled benefits. If Congress does not do something about Medicare, by 2026, this program will only be able to pay 89 percent of its projected costs.

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AARP. “Medicare and Social Security Financial Woes Persist.” (accessed September 23, 2019)