2011 Medicare & Social Security Report

Annual Report on the financial health of Medicare and Social Security
Each year the Trustees of the Social Security and Medicare trust funds report on the current and projected financial status of the two programs. This year’s report was released on Friday, and we thought you might like to know about the key findings.
According to government predictions, Medicare’s largest trust fund will run out of money in 2024, five years earlier than projected last year. The program’s faulty finances are, in part, a symptom of the sluggish economy. Higher projected health-care costs and lower payroll taxes are being blamed for the shortfall. Pressure will doubtless intensify in Washington as a bipartisan effort is made to shore up the 46-year-old healthcare plan that covers more than 47 million elderly and disabled Americans.
Regarding Social Security, the report showed that expenditures exceeded the program’s non-interest income in 2010 for the first time since 1983, and that the program faces a $46 billion deficit for 2011. The projected point at which the combined Trust Funds will be exhausted comes in 2036 – one year sooner than projected last year. At that time, there will be sufficient income to pay only 77 percent of scheduled benefits.
The report concluded by saying that, “projected long-run program costs for both Medicare and Social Security are not sustainable under currently scheduled financing, and will require legislative corrections if disruptive consequences for beneficiaries and taxpayers are to be avoided. The financial challenges facing Social Security and Medicare should be addressed soon. If action is taken sooner rather than later, more options and more time will be available to phase in changes so that those affected can adequately prepare.”[i]
While it is impossible for us to address all the nuances of Medicare and Social Security in this brief communication, let alone all the proposed solutions, we wish to draw your attention to the two italicized words at the end of the previous paragraph: adequately prepare. Of all the information we found in the eye-crossing 244 page report (you can read it here: (www.socialsecurity.gov/OACT/TR/2011/tr2011.pdf), these two words strike us as most significant.
No one can predict with certainty what the future of Medicare and Social Security will be. Most people agree that reforms are needed and that changes will be made, but what those changes will be and how they will affect beneficiaries, remains to be seen. What we do know, is that we must adequately prepare in every way possible.
Adequate preparation requires a number of things. It involves taking your life expectancy into consideration when deciding what withdrawal rates are sustainable in your portfolio. It includes choosing an asset allocation that is likely to keep pace with inflating healthcare costs. It means considering whether long-term-care or other insurance coverage is right for you. It dictates determining the best time to start collecting benefits.  Many important decisions must be made when preparing for the future and it is unwise to rely too heavily on government programs for support. Although making the right decisions can be challenging, we are here to guide you through the process.
If you have questions about how anything in this report could affect you or your loved ones, please don’t hesitate to reach out to us. We are here to serve you.
Sincerely,
Bradley E. Connors
Certified Wealth Strategist ®

[i]All data in this letter is taken from: http://www.socialsecurity.gov/OACT/TR/2011/tr2011.pdf
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