Is Social Security Secure?

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Everybody says Social Security and Medicare are going 'bust'.  Is it true?  In this short message we tell you what is important to keep in mind about government entilement programs.

Video Script
Everybody says Social Security and Medicare are going 'bust'.  Is it true?  

Well, no.  But it's more complicated than that.

Both programs are 'pay as you go' meaning that the only money available to pay for them comes from Social Security and Medicare tax revenues or other general government revenues.  Taken by itself, Social Security  is in fairly good shape with revenues from the Social Security tax projected to cover most payments owed to seniors. With modest increases to the retirement age to reflect our increasing life spans and perhaps some tweaks to the cost of living formula, Social Security should be here for the long run.   

But Social Security only works with Medicare.  It does you no good to get a Social Security check if you simply have to turn around and pay it all out for health care.  And here's where the story gets disturbing.  The cost of healthcare paid for by Medicare is rising far faster than inflation and incomes combined.  In fact Medicare outlays are growing so fast that eventually they will be about as large as old age pensions.  With inflation and more people eligible, experts project Medicare to double its share of national income in less than twenty years.

And the problem is that the premiums that seniors pay for Medicare only cover a small fraction of the total costs.  The rest is supposed to be covered by the Medicare tax.  But with healthcare costs spiraling ever upward the tax no longer covers it all.  This means that at some point the government will have no choice but to cut back the proportion of the premiums it pays.  The result:  more health care costs falling on the shoulders of seniors.

So you probably can count on that Social Security check coming every month, perhaps a little smaller and starting a little later.  But be prepared to pay more, much more for your health care.