Trustees Report: Medicare Trust Fund Gets 4 Year Reprieve, Social Security Depletion Date Stays at 2030Financial and taxes in retirement
July 28, 2014 — Every year the 6 Trustees of the Medicare and Social Security trust funds issue a Report on the state of these 2 popular programs. This year the big news is favorable for the Medicare program – the year in which its Trust Funds are exhausted has been pushed back 4 years – to 2030. The good news is attributed to lower than expected inpatient hospital utilization, among other reasons, and represents a big change since last year’s report.
Over in the world of Social Security the news is the same as last year – the combined Trust Fund for retirement and Disability depletion date remains unchanged at 2033.
Do 2030 and 2033 Mean Doomsday for Social Security and Medicare?
The short answer is no. Those are the dates that accumulated reserves are exhausted (currently they also produce interest income, which of course will stop when the money is gone). The Social Security program receives the majority of its funding, about 75%, from current payroll taxes. The problem has occurred mainly because huge numbers of baby boomers are beginning to draw retirement benefits, while a smaller pool of active workers is available to pay those taxes. In 2030 and 2033 the only source of funds will be payroll taxes, and if nothing else is done funding will only be available to pay 77% of promised SS benefits.
A Note About Your Benefits
A lot of people are under the mistaken impression that you have sort of a bank account with your SS and Medicare contributions in it. You don’t. What you do have is an account that tracks what you have paid in, which will determine what you ultimately receive. These programs are an inter-generational social contract – the benefits you pay when you are working go to workers who have already retired – and when you retire the next generation starts paying yours. So far, most people have received more than they actually put in. However if the program is not corrected soon, that might not be the case for the next generation.
The Trustees in their report urged action to correct these expected shortfalls. Here is part of their statement:
“For the past several years, the annual Trustees Reports have warned lawmakers and the public of the financing shortfalls facing the Social Security and Medicare programs, emphasizing that continued delay in legislating corrective measures is likely to make the challenge ever more difficult to resolve and result in undesirable consequences.”
What Can We Do?
The canary is singing in the mine but none of us seem to be listening. The recipients of these programs (that’s most of us) threaten our elected representatives if they dare to talk about making the slightest change in their benefits. Our elected officials don’t have the courage to make small tweaks now that could fix the problem. So here’s our opinion, for what it’s worth – encourage your elected representative to take some action on Social Security and Medicare now, before their indecision ruins your grand children’s future. It wouldn’t take much to insure that they get close to the same level of benefit that we are getting.
We would love to hear your positive suggestions on how this crisis could be resolved. But please, don’t get into liberal vs. conservative type bashing, those type of comments will be removed.
For further reading:
The 2014 Social Security and Medicare Trustees Report
What You Think You Know About Social Security Could Hurt You (A Series)