What About Entitlement Reform?

Mona Lisa Vito — Mon, 12 Jul 2010 14:58:56 +0000

On May 13, 2009 the trustees of Medicare and Social Security released a report detailing the impending insolvency of our nation’s two biggest entitlement programs: Medicare in 2017 and Social Security in 2037. Projections have pushed these bankruptcy dates up from the previous report’s estimates of 2019 for Medicare and 2041 for Social Security. The percentage of federal spending sucked up by these two entitlements has been increasing for years. In 1990 they made up 28 percent of federal spending. This number is expected to soar to nearly 40 percent by 2019. By the numbers, converted to today’s dollars, over the next 75 years Social Security and Medicare will cost approximately $103.2 trillion, while taxes and premiums toward the trusts’ replenishment will total only $57.4 trillion. This will leave a gap of an astounding $45.8 trillion. The frightening reality is that no provision exists under the current policy regime to address the programs’ projected bankruptcy, meaning that once current assets are exhausted benefits will fall. Medicare will be literally unable to pay all its hospital bills just seven short years from now. The first Social Security beneficiaries to be hit by this failure will be disabled Americans whose fund will run out of money in 2020.

Entitlement Reform: What happens when Medicare and Social Security Are Bankrupt?

This threat has been looming in the background for years, and though successive administrations have “kicked the can” down the road we must confront the fact that the financial health of our two major entitlement programs has withered more during this recession than at any time since the mid-1990s. Though the economic downturn has contributed significantly to the programs’ rate of decline given the fact that worsening unemployment figures mean fewer workers are paying into the trusts’ funds through payroll taxes, the pressure of baby-boomers aging into the programs has pushed their financial health to the breaking point independent of current economic conditions.

These facts point glaringly to the need for entitlement reform. Obama administration officials have suggested that if the legislature were to act the programs’ insolvency could be bridged in three ways: by raising workers’ Social Security payroll taxes by 2 percentage points, by reducing benefits by 13 percent, or by a combination of the two.

Baby boomers are no longer retiring

Annie Finneran — Tue, 05 May 2009 19:45:13 +0000

Our economy is in a crisis and it’s not helping baby boomers who thought they were close to ready to retire. Money is an increasing concern for baby boomers and many have lost their retirement savings in the past few years due to the stock market decline. Many retirees are even ending retirement to return to work. As businesses cut back on both retirement benefits and pensions, baby boomers are realizing they need to work longer in order to fund their expensive retirement goals.

Many baby boomers are reviewing their retirement objectives. Options include continued employment and increased savings strategies. More than 43% of baby boomers are expecting to continue employment for their current employers at reduced hours during retirement.

Merrill Lynch highlighted some interesting points from The New Retirement Survey.

· Approximately 76% of baby boomers intend to keep working and earning in retirement.

· Many baby boomers are working past the “normal” retirement age of 65. 65% will stop working and retire but in their late 60s as opposed to 60 or 65.

· 53% of baby boomers are worried about their ability to pay for healthcare

Healthcare is definitely a problem nowadays with many baby boomers being laid off early and not eligible for Medicare. These people have to look for health insurance and many are being denied healthcare due to preexisting conditions.

Medicare Solutions Blog » Baby Boomers

What About Entitlement Reform?

Baby boomers are no longer retiring