retirement planning services since 1987


Reform Medicare and Social Security, Before it’s Too Late

Last month, the trustee reports came out for Medicare and Social Security.

They get just a blip in the media, if any coverage at all. But if you’ve been reading my blog, you know I bring these up annually.

And in 2018, the message is the same as in years past – the current path leads to insolvency most likely, but there are tools and time available to fix the situation.

However, this year is significant for a new reason – it’s the first time in 36 years that both programs will have to draw down asset reserves to pay benefits, instead of using investment interest.

The time has come to tap the “rainy day fund.”

Change is needed, but any changes in these programs will be profound because one in six Americans collect Social Security benefits. Of them, 80 percent are older beneficiaries, while 20 percent are collecting for disability or survivor benefits from a deceased worker.

Currently, Social Security will pay all scheduled benefits until 2034 or so. Medicare’s hospital trust fund will run out of money in 2026 (three years earlier than projected).


What got us here?

Reduced payroll revenues, higher payments to hospitals and Medicare health plans, and miniscule premium increases.

While we OBVIOUSLY need reform, it doesn’t seem to be a priority in Washington D.C.

At least the Trustees have the right idea. Here is their 2018 conclusion:

Lawmakers have many policy options that would reduce or eliminate the long-term financing shortfalls in Social Security and Medicare. Lawmakers should address these financial challenges as soon as possible. Taking action sooner rather than later will permit consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.

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