Social Security and Medicare

Here are a few links on Social Security and Medicare from this week.

From Bloomberg:

 

Medicare, to stay solvent for the next 75 years, would have to immediately raise payroll taxes by 24 percent, or cut current benefit payments by 17 percent, Cori Uccello, a senior health fellow with the American Academy of Actuaries in Washington, said in a phone interview.

Because of the power of compound interest, the longer reform is postponed the greater the problem. What about Medicare and Social Security?

 

While Medicare won’t have sufficient funds to pay full benefits starting in 2024, five years earlier than last year’s estimate, Social Security’s cash to pay full benefits runs short in 2036, a year sooner than the 2010 projection, the U.S. government said today in an annual report.

The   Washington Times  expands this:

The trustees stressed that exhaustion of the trust funds doesn’t mean the programs will stop paying all benefits. Social Security could fund about three-fourths of benefits past 2036, and Medicare could pay 90 percent of benefits past 2024 under current trends.

From the Ways and Means Committee of the House which oversees these issues:

“Today’s report makes it clearer than ever that doing nothing is not an option. The failure to act means current as well as future beneficiaries, will face significant cuts even sooner than previously estimated.”

While this is blindingly obvious,  apparently Newt Gingrich is blind. 

While it may be too late for many readers, relying on government is a weak option. Personally I recognized twenty five years ago that I was being lied to and took appropriate steps. I am not fully ready yet, but I am close.

If you are young then you need to begin preparation for leaving your future reliance on the system of Babylon the Great. This includes steps like driving a used car, renting instead of buying and saving the difference, and being careful financially. If you are on Social Security now, you are probably safe. But if you are 10 to 20 years from retirement, as I am, you should be concerned.

What do you do? What should anyone do? As I said in one of the first posts in this blog, and what I plan on as a theme here: "Do The Best You Can." (DTBYC) Leaving Babylon the Great and its economic system is difficult, but it is not impossible.

Comments

[eric anderson]

People need to understand -- especially those now paying into Social Security/Medicare today -- that the so-called "trust funds" are nothing but non-marketable government bonds. There is no fund, only paper promises from the government. However, it is true that they are based on trust. Do you trust the government to pay back those bonds (with interest) in dollars that are worth enough to make up for the inflation that has occurred in the interim? Social Security benefits will have to be reduced based on need (i.e. those who have incomes from other sources may find their SS checks reduced), or taxes will be raised, or more money will be printed and benefits will be nominally the same, but the money will be worth a lot less and will not go as far to purchase basic needs. Perhaps a combination of the above.

If one were to reduce this to a metaphor, I believe one day those who are depending on Social Security to be there for them will wake up to find that they have been raped by a French man named Dominique, and there is no one to whom they can report the crime. Then the inevitable question, were they "asking for it?" I don't blame the victim, but if you know the inevitability of the above and do not take steps, then the probability is that something bad is going to happen to you. Although I believe rapists bear culpability and should be executed, I would still advise women not to walk through deserted city streets at 3am wearing nothing but their underwear. Metaphorically speaking.