haydayhayday March 24, 2013

Highlights from this article about the unsustainable Social Security and Medicare programs.

Not like we haven’t heard it all before.

The problem is more money is being paid out of the system than is going in. The shortfall, now about $200 billion a year, is being made up by drawing on the $2.73 trillion Social Security Trust Fund.

The fund is U.S. government bonds that have been bought by the Social Security Administration for 30 years with money paid by baby boomers. They have spent most of their working lives paying more into the system than it spent.

The extra money was lent to the government, which used it to offset some of the huge deficits of the 1980s and 2000s. (Without the overpayments, the government surplus in the late 1990s wouldn’t have happened.)

Now, the retiring boomers are taking out more than younger workers are putting in. According to current estimates. the trust fund could be fully tapped as soon as 2033.

Count on Social Security, in one form or another, being around for a long, long time. But don’t count on it to be as generous as it was in the past.

A recent survey from Banker’s Life and Casualty found that two-thirds of middle-income wage earners believe Social Security will pay at least half and some as much as 75% of their retirement costs. Some Americans consider Social Security their major income stream during retirement. Bad idea.

Q: Speaking of health care. I understand Medicare is in worse shape than Social Security.

A:You bet it is. The Government Accountability Office estimates the 75-year funding gap will be a staggering $76.4 trillion. The Medicare Security Trust Fund could run dry as soon as 2016, according to a 2011 report from the trustees. And the system is rife with fraud and abuse, costing us nearly $100 billion a year—yes, a year—according to some congressional estimates.

By some estimates, we will receive health care that costs three times what we paid into it in our lifetimes. Clearly, that’s unsustainable and the only way out is to cut benefits or up the individual ante—neither of which garners much enthusiasm from, well, anyone.

But, like Social Security, some form of Medicare will be around for some time though you can expect that it will be parceled and pared down considerably.

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(OK, so we spend too much on our Defense. Not that we haven’t heard that before either, so you can save your breath. And we won’t have a topic that goes off into the wild blue. Start your own thread if you want to discuss Defense. Thanks.)