Medicare, Social Security, and Unfunded Liabilities Oh My! –The Truth About These Programs
A year ago, things were looking rather dire for Social Security, Medicare and Social Security Disability. I wish I could say that after a year things were looking slightly better, but unfortunately today things are looking worse yet for these unfunded domestic liabilities that so many Americans rely upon for their day to day sustenance. Granted, there are plenty of individuals out there living on disability who have absolutely no business being on the system, plain and simple they need to go out and get a job. But imagine a world where there is no aid for those who truly need it, and a time when Social Security can no longer pay 100% of its benefits. For an elderly person who is reliant upon monthly Social Security checks for day to day living, this is serious news.
Annual Report Indicated Things Are Worse For Social Security And Medicare Than We Originally Thought
According to the annual report of the trustees, Social Security is expected to go entirely bankrupt in 2033, just 20 years from now. For many people reading this article, that might be right around when you are hoping to retire. Social Security Disability will be bankrupt by 2016, and Medicare will be bankrupt in 2026.
Unfortunately, the impact on Americans will be profound if nothing is done to prevent the insolvency of these programs.
- Social Security Disability is only three years from Bankruptcy, so for the most fragile and needy Americans we will have no choice but to reduce those benefits for those who probably need it more than anyone else.
-If nothing changes, Social Security will have exhausted its surplus by 2033 and without changes will only have the money coming in to pay 75% of the promised benefits between 2033 and 2087.
-Medicare will only have the ability to fund 87% of its benefits with taxes and premiums once it is insolvent after 2026.
Another piece of information that may surprise you is that the government is under no obligation to actually pay these benefits out to Americans. If the government wanted to shut down the programs today they would have the ability to do so, because no debt is owed. Likewise, if the decision was made to cut benefits, there would be no legal recourse, those receiving benefits would simply have to accept a smaller amount.
To Make Matters Worse For Social Security, Medicare And Medical Social Security Disability
To further intensify the matter, the board of trustees has also greatly overestimated the financial strength of the programs. Things are actually worse off than we were led to believe.
-They used the wrong life expectancy. Rather than figuring life expectancy on the current 80 years, the board of trustees determined solvency of the programs based on a 75 year life expectancy. Who’s going to fund the remaining 5 years? Does someone get cut off when they hit 75?
-The report also makes the assumption that investments will perform better and more people will be employed based on a 5% improvement in GDP growth. While this would be fantastic, most economists conservatively predict 1-2% growth.
In a nutshell:
The writing is on the wall for Medicare, Social Security and Social Security disability. Money doesn’t simply materialize out of thin air (unless you’re the Fed…and even then with many complications). The tax base is shrinking while the elderly population grows in leaps and bounds. Something has to be done to adjust the current programs in order to keep them up and going in some form for future generations. As a future retiree and hopeful recipient of benefits, you must be prepared financially for retirement because you cannot count on Social Security and Medicare to be there for you, at least not in their current format. Don’t get caught in the trap of assuming you will have social benefits, when in all actuality you will have less or no benefits. For more information on how to get prepared for your retirement, speak to a Redhawk Wealth Advisor near you today.