Did you know that Social Security and Medicare have reported that their systems are becoming insolvent? Social Security and Medicare are both hot button topics. After years of retiring, people undeniably want to live out their retirement years peacefully, knowing that they are financially secure. While Medicare matters for those who need affordable healthcare and disability insurance. Did you also know that by 2034 and 2052, the Trustees Report Summary projects that the Old-Age and Survivors (OASI) and Disability Insurance (DI) will deplete? Keep reading to learn more details about this annual report and how it affects you.
Social Security has been around for 84 years helping those set for retirement, feel secure. The amount of money collected, thus far, is about 21.9 trillion dollars, while the amount paid out is roughly 19.0 trillion dollars. At the end of 2018, 2.9 trillion dollars remained in the OASI and DI trust funds. In 1982, there was a report of social security exceeding its income. However, this was the last report of such a shortcoming. In 2020, this shortcoming is set to start occurring again.
Medicare has been around since 1965 under the leadership of President Lyndon Johnson. Regardless of income, Medicare is typically affordable and excellent for those who are elderly or disabled. Two trust funds that fall under Medicare are Hospital Insurance (HI) and Supplementary Medical Insurance (SMI). Both have parts in paying for inpatient hospital services, hospice care, health procedures that need implementation after a hospital stay, and more. In 2026, the HI fund is set to deplete.
What Caused Such a Drastic Change?
As baby boomers retire, there is an increase in beneficiaries. Also, since the baby boom era (1946-1964), there has been low birth rates, meaning that fewer babies are coming into the world. A smaller population equates to there being slow growth in employment and gross domestic product (GDP), defined as the economic activity within a country.
The Good News
The good news is that policymakers have policies that can combat long-term financial downfalls. Lawmakers need to discuss and implement these policies as soon as possible. Social security and Medicare beneficiaries need adequate time to prepare.
Some Solutions Offered to Combat the Depletion
- Slightly increase percentages that employees and employers pay towards social security and Medicare
- Allow younger employees to allocate some of their payroll tax money into a private account.
- Eliminate a payroll tax cap for all employees who make over $132,900