The fate of our Medicare and Social Security benefits are back in the news with the program’s annual report released June 5th. The news isn’t great but a crisis can be avoided.
WHAT IS THE STATUS OF THESE GOVERNMENT PROGRAMS?
- Medicare’s finances were downgraded: the Medicare insurance fund will be depleted in 2026, earlier than expected.
- The Social Security trust fund is expected to be depleted by 2034.
- Social Security had to dip into the trust fund to pay for the program this year (first time since 1982).
WHAT ARE SOME OF THE CONTRIBUTORS TO OF THIS SITUATION?
- Lower Income tax revenue.
- Lackluster economic growth.
- Living longer.
- Higher expenditures.
WHAT DOES THIS MEAN FOR FUTURE GENERATIONS OF RETIREES?
- The benefits do not disappear!
- Tax income should pay for about 75% of retiree’s benefits in the future.
- Lower the cost of healthcare.
- Increase the age for full benefits.
- Increase payroll taxes.
- Reduce benefits.
WHAT CAN WE DO TO SHORE UP OUR PERSONAL FINANCIAL PLANS?
- Save more. Ex: Annual 401(k) increase.
- Plan to work longer.
- Delay claiming benefits (and they increase).
- More people may need to use home equity as a retirement resource.