Social Security and Medicare are in trouble. Now, that’s not news. We’ve known that for a while, and I’ve covered it quite a bit here on this channel. But what is news today, we got an updated accounting of how much trouble those programs are really in. Now this is a long video, but it is so important because it impacts every single American. So if you don’t have time to watch this video now, come back to it when you have a few minutes.
Today, the Social Security and Medicare boards of trustees release the annual trustees reports for both Social Security and Medicare. Those two reports give Congress a real time assessment of how long we have until the money runs out in those trust funds and Social Security and Medicare benefits start to shrink. So it’s very important for you to understand, theoretically, when the money runs dry in these trust funds, that does not mean that Social Security and Medicare is gonna just automatically cease to exist and you get nothing. No, that’s not how it works. It just means if we get to that point, the amount of benefits you would receive from Social Security or Medicare would be reduced.
Second, this can change, obviously, if our politicians make some tough decisions, which I’m gonna talk about in just a second. But first, according to today’s report and the current assessment of the Social Security Trust Fund, Social Security benefits will be able to be paid out at 100% until 2033. That is just nine years from now. After 2033, this report says people who receive Social Security will only receive 79% of the benefits they are getting today. Right.
Last year’s trustee report also said Social Security benefits would be paid at 100% through 2033. So the good news here is things didn’t get worse, it stayed the same. The Disability Insurance trust fund is in much better shape than Social Security. The report says 100% of those scheduled benefits can be paid out at least through 2098. The report also found that if the Social Security Trust Fund and the Disability Trust Fund projections are combined, those programs would be able to pay out 100% of benefits to all beneficiaries until 2035, which is actually better than last year’s projection of 100% payout until 2034. After 2035, Today’s report says the beneficiaries be paid out 83% of what they are receiving now. But that is all theoretical because in order for those trust funds to be combined, Congress has to pass a new law.
Lastly, when it comes to Medicare, the trustees report says the Hospital Insurance Trust Fund, which funds part of Medicare, we’ll be able to pay out 100% of scheduled benefits through 2036. That’s five years later than last year’s projections, which is much better. After 2036, beneficiaries would only receive 89% of the benefits they are getting today.
So let’s talk about why this is happening. It’s simple. There are more people drawing on Social Security and Medicare than there are people contributing to those programs. And people are living longer, so they’re drawing on the program for longer. It’s important for you to understand when those Social Security and Medicare taxes are taken out of your paycheck every pay period, that money isn’t going into a special savings account just for you? No. That money goes into places like these trust funds to pay for the people who are elderly now and using their Social Security and Medicare benefit.
It’s now, the trustee’s report says, the reasons why we’re not seeing more improvement in the trust fund for Social Security is because of the decrease in the assumed long term fertility rate. So they’re saying people aren’t having as many babies as they used to that can grow up to become workers who contribute to these programs to sustain it. Does that make sense?
On the flip side, the report found the positive increase in funding for the hospital insurance for Medicare is because of several things, including higher payroll tax income from the stronger than expected economy, combined with the actual reduction in spending on medical cost into 2023.
So let’s talk about the politics of all of this because it’s going to become very important in this election year. There are really only three ways to fix this. And I’m going to warn you, none of them are good options. 1, the government can pump more money into Social Security and Medicare by increasing taxes on everybody. 2, the government can’t increase the retirement age so people pay into the program law longer and are waiting longer to start withdrawing from the program. Or 3, the government can take on more debt to keep paying for the program as it is with no reduction of benefits and no raising of the retirement age. See, I told you, no good options. The fact is this, Social Security and Medicare will cease to exist eventually if no changes are made to the program’s benefits or funding structures, according to the federal actuaries who compile all this data.
Neither President Biden nor former President Trump have released any detailed proposals to fix this mess. The only thing President Biden has said is he wants to increase tax access for the highest income Americans to keep these programs funded without reducing benefits. So we’re gonna see this fight come into focus next year when both the debt ceiling deal and the Trump tax cuts both expire.
Just so you know, the US government spends more than $6 trillion every single year. Nearly half of that money goes to paying for Social Security, Medicaid and Medicare. Those are the biggest of the so called government entitlements and they have kept growing in size and expense every year. The funding of these programs are based on the size of the US economy, the tax revenue the programs receive, birth rates and immigration.
So it is a complicated mess, I know, but if you want to read this report for yourself, I will email it out to you tonight in my News Girl News round of email. So make sure you sign yourself up.