Every year, the Social Security Board of Trustees reports to Congress on the fiscal health of the Social Security program. Not surprisingly, high unemployment and a wave of retiring baby boomers have put a heavy strain on the program. Benefits being paid already exceed tax revenues collected and in their 2011 report, the board estimated that the program will only be able to pay promised benefits through 2036 (one year earlier than previously estimated). At that point the Social Security trust fund will be exhausted and revenue from workers will only be able to pay about 75 percent of promised benefits.
As grim as that sounds, the problems with Medicare are worse. Thanks to higher health care costs and lower payroll taxes, the Medicare Board of Trustees now expects the Medicare trust fund to run dry in 2024 (five years earlier than previously thought). The difference between promised benefits and estimated funds available is roughly $37 trillion.
What does this mean for you?
In all likelihood, your taxes will be going up and your benefits will be going down. Those close to (or in) retirement, will see fewer changes than those with a decade or more to go, but in my opinion, no one will be immune. The problems are just too big. If you’re in your sixties you will probably receive most of what was promised to you. If you’re in your forties, you won’t be so lucky. Plan accordingly.