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Retirement Programs Suffer and Nobody Cares

June 24, 2019

The financial condition of the government’s cornerstone retirement programs – Social Security and Medicare – is unsteady and getting worse.


According to the latest Social Security and Medicare Boards of Trustees report, Medicare is headed toward insolvency by 2026 and Social Security by 2035. Last year’s report was similar (it had Social Security reaching insolvency a year earlier), so the situation remains similar and sobering.


The truth is, both programs need massive overhauls to avert benefit cuts before funds run out. But, from President Trump on down, nobody wants to take that on – cutting people’s benefits doesn’t win elections. It’s not even on their radar.


The government’s iffy financial situation took another big hit with this report. Unfortunately, the people with the power to make a difference are unable (and seemingly unwilling) to take action.


Republicans say program cuts are a non-starter, while Democrats want to expand the programs. Neither philosophy addresses the financial problems.


Where they do agree is that it’s better to act sooner, instead of letting the problems further snowball until the only solutions left are drastic ones. But none of these potential cuts will win votes:


  • Curbing Social Security cost-of-living increases

  • Increasing payroll taxes

  • Raising the Medicare retirement age

  • Raising the Social Security retirement age


But the reality is Social Security is planning a 1.8 percent cost-of-living increase for 2020.


Without action, eventually both programs will be unable to cover the costs of promised benefits. For Social Security, that means many retirees will lose vital income to cover basic expenses. For medical providers, it means they’ll earn less in fees from Medicare patients.


To fix the shortfalls, we need a 1 percent payroll tax increase or a 19 percent spending cut. Good luck getting either of those out of a current politician.

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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