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If you are under 40 forget about getting Social Security

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While it comes as no surprise, both Medicare and Social Security are financial disasters waiting to happen. In a report issued today by trustees of these two large government programs, while the dates of bankruptcy are unchanged, the date of the programs being cash flow negative have moved up to a date closer than was previously thought.

According to an AP report: " The first year that payments will exceed income for Social Security will occur in 2017, just nine years from now, reflecting growing demands from the retirement of 78 million baby boomers. Medicare is projected to pay out more than it receives in income starting this year.

"The financial difficulties facing Social Security and Medicare pose enormous challenges," the trustees said in their report. "The sooner these challenges are addressed, the more varied and less disruptive their solutions can be."


One of the Trustees is none other than Treasury Secretary Henry Paulson. Paulson was very pessimistic about the future of the programs.

The AP report continued: " Without change, rising costs will drive government spending to unprecedented levels, consume nearly all projected federal revenues and threaten America's future prosperity," Paulson said in releasing the new report. "Our nation needs a bipartisan effort to strengthen both programs for future retirees."

I posted last week about the need to move to a private pension system along the lines of Chile. Since starting their reform in 1981, returns have been over 10% annually. Workers stand to receive over 80% of their final salary as a pension, about double what Social Security will pay out. That is if you are lucky enough to get it before it goes bankrupt.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 3/25/08

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Last updated: November 28, 2009: 08:16 AM

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