More Bad News on Social Security and Medicare Trust Funds

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Social SecurityFor years, people have worried about whether Social Security and Medicare would be around when they needed the benefits that those two programs provide. On Monday, worriers got bad news: The programs are closer to running out of money.

The government released the latest versions of the annual Social Security and Medicare Trustees Reports on Monday, and the results were troubling:

  • The combined trust fund that holds funding reserves for the overall Social Security program is now expected to run out of money in 2033 -- three years earlier than trustees expected last year.
  • The news for Medicare is even more dire. Its trust fund will run out of money in 2024 under current projections. That's the same as it was last year, but fully five years earlier than estimates from two years ago.
  • Breaking down Social Security into its component parts, the retirement part of the program will use up its trust fund in 2035. But for its disability program, the news is worse still -- its trust fund will go dry in 2016, two years earlier than last year's prediction.

The reduction in Social Security payroll taxes in 2011 and 2012 has led to steep declines in payroll taxes going to the Social Security trust fund. However, the legislation creating the tax cuts provided for reimbursements to the trust fund for any lost revenue, and it appears that the Trustees Reports treat those reimbursements as money available to the trust fund.

What's Next

As DailyFinance contributor Chuck Saletta has detailed previously, demographics are largely to blame for the current crisis. As baby boomers approach retirement age, there are fewer workers in the younger generations to pay taxes to support their monthly benefits. Unless something's done to address the problem, the trustees expect that Social Security will have to cut benefits by about a quarter across the board when the trust fund assets run out.

Medicare's problems are even more potentially catastrophic for retirees. Social Security may provide regular income, but Medicare pays a big chunk of the huge unexpected expenses that medical problems bring to many retirees. Any reduction in benefits to Medicare would leave retirees dangerously exposed to financial disaster.

Regardless of what action lawmakers take to address the problem, the Trustees Reports emphasize how important it is for you to have your own retirement nest egg. Counting on Social Security and Medicare for all of your financial needs could be the worst mistake you'll ever make.

For more on retirement issues:

Motley Fool contributor Dan Caplinger wonders if Social Security will still be around when he retires. You can follow him on Twitter.


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358 Comments

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mnhmdh

The government should put back all the money they used from this fund, and quit giving so much to foreign countries. Lets take care of our own. Don't see foreign governments giving us any help.

April 25 2012 at 8:58 AM Report abuse +2 rate up rate down Reply
califcomeaus

I don't think we would have any problems if everyone on the roles would have contributed in the first place.

April 25 2012 at 8:44 AM Report abuse +2 rate up rate down Reply
CherMoeLin

This article and many others paints this as bad news whereas my letter from Congressman Dennis Kucinich just yesterday says that Social Security is as strong as ever and included the lengthy report on the state of Social Security. According to Dennis Kucinich, all the fund needs is for the cap to be raised on earnings that are taxed. I believe this myself.

These articles are scare tactics by those who want to destroy Social Security and Medicare. They need to start working WITH the American people instead of trying to fleece us of our hard-earned pensions and savings and quit using FEAR to control the people and their money.

April 25 2012 at 7:52 AM Report abuse rate up rate down Reply
DEAR LORA

If Social Security payments actually cut the amounts currently paid to retirees, it will implode the structure of society ... people will leave the country and live in places like South America. Buenos Aires is a large metropolitan city where the American dollar goes much farther than it does here. Those receiving SSecurity in amounts below, for example, $1000 per month and who have no other source of income and no savings and no investment portfolio will stay in their houses as long as possible, saving up their monthly mortgage payments towards making a new life elsewhere. If Medicaire refuses to take care of us at age 75, refusing
certain treatments, putting millions of people in harm's way, you can just bend over and kiss this country
goodbye. Because it won't be America anymore.

April 25 2012 at 6:47 AM Report abuse rate up rate down Reply
bmiller616

What I never see in these articles is the amounts of money borrowed by congress, the IOU's they owe these two funds, and what they spent that money on....

April 25 2012 at 6:10 AM Report abuse rate up rate down Reply
xlco112475to0315

They need to stop looting the SS trust fund for payment to those who have never contributed to the system. AND like many other commenters the government needs to repay the trust fund for the loans. (Which will never happen). Social Security paid for Vietnam under Johnson as soon as Johnson transferred the SS money into the general fund. The SS fund is now just a number on a sheet of paper in some book someplace.

April 25 2012 at 3:00 AM Report abuse +3 rate up rate down Reply
bystephani

MORE LIES, LIES, LIES. Nathan no one gets $6,000 to $10,000 refunds. Show me that cheque or STFU about them.
Elaileen, The last time the average life span was 60 years old was the 5th century, not in your life time of that of social security.
Tea4Taylor & Pamela GeeGee, TURN OFF FOX NEWS, you are completely off base about everything you utter about Medicare get the facts from someone who knows, you are listening to the people who want to tale it away from you and spend the money on themselves. If you do not STFU and start voting right YOU are going to piss away all the money in Medicare not anyone else JUST YOU will be to blame.
The only place that the Social Security or Medicare money goes is to those funds to pay those benefits. Not to the ‘less fortunate, or to welfare, or 6 to 10 thousand tax refunds for people with ‘too many kids’ Nathan, Taylor & Pam. However your Mitt Scamneys, Rush Limpdicks, Sick Rantorums, Sarah Failins, Glen BecKKKs, Sean ********, and the rest of those thieves are planning to steal it for themselves, so there will not be any left for you. The person that wrote this article is a wall street dirt bag that wants to get their hands of the ‘management’ of these funds so they can charge HUGE, HUGE, management fees to ‘manage’ the fund and churn it all away on commission flipping. When they do that and POCKET all those billions in fees, then it really will be gone and bankrupt. They will be leaving NOTHING to pay your bills with, in your old age. Nevertheless, they care not; they will be much richer on all those fees and commissions while you starve all because of your OWN STUPIDITY.

April 25 2012 at 3:00 AM Report abuse +2 rate up rate down Reply
1 reply to bystephani's comment
nathan.denton

Yes People do get that much in tax returns,, i work with two of them, its called a child credit they get it when they file there taxes if they havent made a over a certain amount that year.One of them got over eight thousand and another over nine thousand...If you dont belive me just call up H R block and ask them about it... Its a bunch of BS. and theres a ton of people who also recive this.

April 29 2012 at 6:31 PM Report abuse +1 rate up rate down Reply
kgr656

With 46 million people on food stamps, it's no wonder that the SS fund will suffer as the foundational income it had in the past is no longer there. A larger portion of our population chooses to leech off the government, and are being encouraged to do so by the current administration (it costs money to buy votes). It annoys me to have Social Security referred to as an entitlement, when it is actually retirement income insurance for people (like me) that payed into it their entire working life. I'm not receiving SS benefits yet, but if it will help, I'll gladly opt out of receiving them, provided the Federal Government returns the money I've put in. All I ask for is the principle, which is only fair. But wait, if they did that, they would not have a money source to rape and pillage for any cause that our nanny state government chooses to spend it on.

April 25 2012 at 2:40 AM Report abuse -1 rate up rate down Reply
george

us gov. needs to pay back ss for all the loans they got.

April 25 2012 at 1:52 AM Report abuse +3 rate up rate down Reply
bystephani

STOP LYING YOU %%$#$$%@$^%#@@#%% LIARS. THERE IS NOTHING WRONG WITH THE SOCIAL SECURITY OR MEDICARE FUNDS.

April 25 2012 at 1:43 AM Report abuse rate up rate down Reply