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Social Security Update
The just-released annual report of the Social Security and Medicare trustees contains familiar warnings of major challenges ahead — along with a bit of good news.
The trustees, led by Treasury Secretary Henry Paulson, reported that Medicare is in far worse shape than Social Security. The Medicare reserve fund is expected to be exhausted later this year, and it will run out entirely in 2019, requiring some combination of tax increases and benefit cuts. (Miller-McCune outlined options earlier this year, but more on that in a bit.)
Regarding Social Security, benefits paid out will begin to exceed revenues in the year 2017. Money from the current surplus will be used to make up the difference. However, the surplus is expected to be depleted by 2041.
That time frame is exactly the same as in last year’s report. But the 2008 analysis does change one significant figure.
The new report estimates that in 2041 — the year the surplus is tapped out — tax revenues will be enough to cover 78 percent of Social Security benefits. That’s a more optimistic number than last year’s report, where it was estimated that recipients would receive only 75 percent of projected benefits. (All figures assume no Social Security fix will be implemented between now and then.)
Why the upgrade? According to The Associated Press, the report increased the number of immigrants — legal and illegal — who will be arriving in the country in future years. Additional workers mean more money will be going into the payroll tax system.
Lou Dobbs, take note.
Social Security’s challenges, and the options for dealing with them, are explored in a three-part Miller-McCune series, which can be found here.
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