By Brad Stark
Founder and Chief Compliance Officer
The Trustees of the Social Security and Medicare Trust Funds have submitted their financial report this month and we have highlighted the main takeaway points.
Social Security (2018 CPI Adjustment of 2.2% and Reserves to be depleted by 2034)
- In 2022, it is projected that program costs will exceed payroll income coming into the fund.
- It is projected that the “reserve” account will be depleted in 2034.
- In 2034 payroll tax revenue alone is expected to only cover 77% of scheduled benefits.
- Projected cost-of-living adjustment (COLA) of 2.2% for 2018.
Medicare (reserve account depleted in 2029)
- The Trust Fund is projected to be depleted in 2029.
- Taxes are expected to cover around 88% of estimated program costs, initially.
Ways to “Fix” the System
- Raise taxes (rates and ceilings).
- Increase full retirement age from 66 to 67 (those born after 1960).
- Reduce benefits.
- Cut 17-20% but probably focused solely on future recipients.
- Change benefit formulas.
- Change cost-of-living adjustment formula.
My Thoughts
- The “can” will get kicked down the road until something “has to happen.”
- A combination of higher taxes, lower and delayed benefits will probably be the solution.
- Cuts to “younger” people will be politically easier to pass vs. modifying benefits for those already collecting (except for changing the cost of living calculation).
- Summary – younger people should expect less and pay more while older recipients should not expect drastic changes but less inflation raises.
Source: SSA.Gov and Broadridge
965906 07/17
