Social Security Benefits for Future Retirees


Will Social Security Benefits be there when I retire?

The SSA (Social Security Administration) promises a specific set of benefits from Social Security, but there are significant reasons to believe that the funding for Social Security (and Medicare) are insufficient to deliver on promised benefits. Inevitably, there will be conflicting political pressures to maintain promised benefits and to reduce the future costs of Social Security and Medicare.

The dramatically increasing lifespan of those receiving Social Security and Medicare benefits, legislated cost-of-living adjustments to Social Security benefits, and rapidly rising prescription drug and medical costs associated with Medicare combine to make it clear that the revenues received by the government for Social Security and Medicare each will soon be insufficient to cover the costs of those programs. Inevitably, this will bring political pressure to further adjust both the Social Security and Medicare programs to either reduce or delay benefits and/or to increase revenues (taxes) to these programs.

Statistics indicate that over the next decade, 76 million baby boomers will start retiring. In about 30 years, the number of seniors and retirees will double. Currently, Social Security takes in more in the form of taxes every year than it pays out in benefits to retirees. But, according to estimates by the SSA, in 10 years, the benefits paid out to Social Security recipients will surpass the amount collected. And if this is true, the Social Security trust fund will be exhausted by 2040 and payroll taxes will pay only about 74% of benefits. The financial picture for Medicare is even grimmer.

The President and Congress are considering multiple options, including “privatizing” some or all of Social Security (that is, allowing either the individual or the government to choose among investment options such as stocks and bonds), further extending the age of full Social Security benefits, increasing the Social Security tax, reducing Social Security benefits, and other options. Similarly, Medicare options include increasing Medicare taxes, increasing the contributions or co-pays of Medicare recipients, and allowing the government to negotiate prescription drug prices with drug companies (a practice nearly universal in other countries but specifically prohibited in the US).