Our Thoughts

Social Security and Medicare: Good News/Bad News

Let’s start with the good news . . . . in a recent article entitled “Deficit Funding,” journalist Bob Veres provides an informative perspective on the present and future of Social Security and Medicare. He starts with the bad news, but I’d rather begin with one of several pieces of good news. Today, nearly all of the money paid out to Social Security recipients, and on behalf of Medicare enrollees, are simply transfers of money paid into the program by workers and retirees in the form of FICA payments and taxes on Social Security benefits. Even if the worst case comes to pass, and the programs go ‘bust,’ they (the government) won’t actually stop paying benefits. There will still be workers who pay FICA taxes, and even if there is no trust fund, these collected payroll taxes can be transferred, as they are now, to Social Security and on behalf of Medicare recipients. How much of future payments would be covered by workers? “The worst-case scenario says that there will be roughly an 18% shortfall in 2040, rising to roughly 22% by 2090.” Basically, that means that Social Security recipients, worst case scenario, would have to get by on 82% of the benefits they were expecting in 2040, and 78% if they manage to live all the way out to 2090. As a 71-year-old receiving Social Security and Medicare benefits, this is good news. But, since I am still working and paying FICA taxes on earned income, as well as income taxes on my Social Security benefits, it’s not entirely good news. For me (and many others), it’s money into one pocket and out the other!  Read more.

Marjorie Fox