Image Credits: Pixabay
Throughout our lives, we tend to focus on our careers, earn a living, and spend most of our time worrying about our professional time. Retirement is the fundamental right of every employee and is meant to be the golden period of life. But is it truly the golden period, lies the biggest question of time.
It is really disheartening to reveal that there are two prominent issues leading towards a challenging situation for America’s senior citizens. Social Security is running out of money. But there’s an even more urgent concern for retirees.
The Social Security Scenario
The popular federal program has two separate trust funds — accounts in the U.S. Treasury.
- The Old-Age and Survivors Insurance (OASI) Trust Fund pays Social Security benefits for retired workers and their survivors.
- The Disability Insurance (DI) Trust Fund pays Social Security disability benefits.
The fact that both of these trust funds will soon be depleted, is raising serious concerns. The nonpartisan Congressional Budget Office (CBO) projects that the OASI Trust Fund will run out of money in 2032. The CBO predicts that the DI Trust Fund will be exhausted in 2052.
Although the two trust funds are separate accounts, Congress would likely dip into the DI Trust Fund to help pay retiree and survivor benefits once the OASI Trust Fund runs out of money. That won’t help much, however. If the two trust funds were combined, they would both run out of money in 2033.
Medicare Facilities
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Apart from issues concerning Social Security, there also emerges a leading concern related to the medicare facilities.
- The Medicare Board of Trustees projects that the Hospital Insurance Trust Fund, which helps pay for Medicare Part A benefits, will be exhausted by 2031.
- Medicare Part B, which covers outpatient services, and Medicare Part D, which covers prescription drugs, aren’t in as dire straits as Part A.
- These two programs have a separate trust fund that’s primarily funded from premiums paid by enrollees and general revenue from federal income taxes and other sources.
How to deal with the above conditions?
There are three basic solutions to the problems facing Social Security and Medicare, all of these options have pros and cons!
- increase revenue,
- reduce spending,
- or a mixture of both.
Pros: Increasing the payroll taxes that fund Social Security and Medicare would generate greater revenue for the programs.
Cons: The downside to these moves, though, is that at least some Americans would keep less of their paychecks.
Pros: The federal government could shift more general revenue to help fund Medicare (and potentially do the same for Social Security).
Cons: This, however, would mean less money for other government priorities.
Reducing spending could be accomplished in several ways.
- Social Security benefits could be reduced.
- Medicare reimbursements to healthcare providers could be lowered.
- Medicare beneficiaries would have to pay higher premiums or share more costs.
- The eligibility ages for Social Security and Medicare could be raised.
Politicians don’t want to incur the wrath of voters negatively impacted by the necessary solutions to fix Social Security and Medicare. Changes will likely be on the way sooner or later, though, because the alternative to not addressing the issues is worse than the solutions that might be required.
Reference: https://www.fool.com/retirement/2024/03/10/social-security-is-running-out-of-money-but-heres/