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











Reader Comments (Page 1 of 2)
3-25-2008 @ 8:49PM
wyldsyde53 said...
This is insane. Why should those of us under 40 be paying into something we will never get to use? The government needs to cut back in all ways. No more free healthcare for congress and the Senate. Serving your country in these ways should not be something that an individual profits from.
3-25-2008 @ 9:17PM
Deni said...
All shuttle missions should be put on hold effective immediatly and any other wasted tax money until such a time that social Security is stable!!!
The IRS should stop beating down the middle class and start finding newer,creative ways to tax the filthy rich.
3-25-2008 @ 9:59PM
moonie said...
This is the greatest country of all to succeed, anyone in America can become a millionaire all one has to do is get the right education and one CANNOT get enough education. Bottom line educate yourselves enough to retire good or starve all your liFe and suffer and die old and poor THATS IT!My advice if you're poor work 2 or 3 jobs if neccessary i did save money NEVER get into credit card debt only buy what you need not what you want strive for your goals work your a-- off otherwise sufefr the consequences thats just the way it is. life is hard but worth it>
3-25-2008 @ 10:04PM
Nan said...
Social Security and Medicare can be saved--all we need is to create well-paid jobs now--invest in education, get the economy to function on a rational basis (not simply based on lobbying etc.), get young people working instead of in prison. get relevant skills for our workforce--foreign companies should be in-sourcing to us! See my op-ed on this subject at
http://www.opednews.com/articles/genera_nandinee_071208_saving_social_securi.htm
3-25-2008 @ 10:46PM
John Huckleberry said...
I have been seeing these same sort of stories since 1960's... Guess what! Still social Security.
3-25-2008 @ 10:55PM
james said...
You have to keep paying for the SS program because the Democrats need that money to pay for all their handouts. They have robbed it at least two times that I know of and I bet they have plans now to do it again. Where do you think the money to pay for all the benefits for these illegals comes from or the money for all these welfare recipients that have never worked a day in their life. You keep voting for the very people that are screwing you so how can you come on here and complain. Oh that's right you are living in denial as to what the real truth is as usual. Democrats love ignorant people like you people. I used to post respectfully as to try and have a civilized dialog, but that didn't do any good due to the closed mind of most that vote for people in the Democratic party.
3-25-2008 @ 11:22PM
Dave said...
Are you kidding me? This blog post is by a guy whose company stands to benefit from a loss in confidence in the Social Security system. Paying attention to this guy's advice on SS is like expecting to get rich because you invested in some precious metals fund you heard hawked on a late-night UFO/Survivalist short-wave radio show.
3-26-2008 @ 12:29AM
John said...
1935 to today, SS has never bounced a check.
SS will be simple as pie to fix, and Americans who under 40 will get every dime of their benefits.
There is no end to the line of crud dishonest brokers can sell to the gullible.
PS - medicare is broken. There are some tough moral choices that need to be made. Basically, we're going to have to learn to let granny die of old age before she's 97.
3-26-2008 @ 12:55AM
lin said...
I'm a sahm . I don't have a good paying job, in fact ....I don't get paid at all.
#2 what does the space shuttle have to do with social security? Do you know how many other programs the government pays for and funds?
I find the information collected on this webpage fascinating. There I go wanted more of a free education again.
http://www.nasa.gov/mission_pages/newhorizons/news/nh_jupiter_oct09.html.
And this comment??? Are you for real???"""The IRS should stop beating down the middle class and start finding newer,creative ways to tax the filthy rich...23-25-2008 @ 9:17PM Deni
Honestly, the Library is FREE.
3-26-2008 @ 2:09AM
Ron Beyer said...
Our politicians are the biggest problem with Social Security and Medicare. They are looking out for Wall Street first. If they can bankrupt Social Security then Wall Street can make a fortune on fees and commissions.
Raising the cut-off from $94K to $125K or so would radically change the long term financial health of the Social Security system.
As far as Medicare, its problems can only be addressed when Congress does something to curtail the obscene rise in medical costs.
P.S. Contrary to what has been expressed in a previous comment, BOTH parties have raped the Social Security trust fund. When the Republican party says the Democrats are fiscally irresponsible it really is a case of the pot calling the kettle black.
3-26-2008 @ 5:36AM
Carolyn said...
I agree, it is not fair for those under forty to be paying for something they will never receive. But those of us coming of age have also been paying all of our lives for Social Security, so we ar ein the same boat. Our leaders need to be much more fiscally responsible about how they spend our hard earned money.
We also need to stop giving money to help other countries and HELP OURSELVES first. Why did Bush recently promise aid of over 700 billion dollars to just ONE country, when we can't even balance our own budget??? If I can't pay my own bills, I surely will not give someone else my money. I have to pay my bills first or I will lose my car or my house. We need a LOT more fiscal responsibility in this country and especially from our elected leaders. If they refuse, excercise your rights and vote them out of office.
3-26-2008 @ 6:53AM
bob said...
In the immortal words of Merle Haggard. turn me loose, set me free. Keep your retirement, and so-called social security. social security has become just another tax. As such, you have no determination in how it is spent, or I should say "given away".
3-26-2008 @ 9:38AM
John said...
First, SS never ever should have had a trust fund. The brilliant people who created the system specifically left that nonsense out. It was a system that collected exactly what it needed each year.
The cornerstone of fixing it should be to take it back to a "pay as you go" system. No trust fund; no lock boxes; no goody jars for military defense spending.
3-28-2008 @ 8:21PM
John said...
Socialist Security must, should and ought to be outlawed. It was "snuck into" law by the Great Satan FDR--a name so ethically repugnant, we must remember him by his initials. His bones should be disinterred and burned, then dumped into the sewers of D.C. as punishment for all the damage he did to this great country.
The perpetual motion machine which uses the American taxpayer as the the fuel is rotten to the core. Stop it now, you damnable Democraps and Retardicans. Oh wait! You people are the ones who approved it decades ago. May you and your parties be likewise damned to the bowels of Hell for all eternity, to sit at the right hand of FDR.
3-29-2008 @ 4:06PM
PetRock235 said...
To fix Social Security, 70 will be the new 65.
4-03-2008 @ 1:53PM
Claude Foutch said...
I am older than most posters; receive SS and Medicare plus have lived frugally, saved every way possible since age 45 & now enjoy a substantial IRA. Social Security needs tweaking to include raising caps on high income folks; extending recipient age to 72 (most of us no longer do manual labor) and adjusting payouts to some formula including cost of living plus wage increases annually. There are many more adjustments that can be made and I believe the program will be with us for the next 100 years, despite the self serving sermon of Mr. Paulson. He works for Wall Street and for a sick capitalist president. I have advised my grandkids to educate themselves; obtain work that serves people and themselves and pay their taxes again, living always within their means, not taking on any debt wherever possible. Our elected reps will ensure SS will continue. Re Medicare: The health system absolutely must be rationalized. These folks have had 6-12% income increases for decades.
4-02-2008 @ 9:23PM
MP said...
Guess what, congressmen do not pay nor draw any benefit out of SS and therefore they do not care. See how soon they fix it if they are made to pay and benefited from SS.
4-03-2008 @ 10:55AM
John said...
See, this is why people who actually believe ignorant things like nobody under 40 is ever going to see their social security money cannot be relied upon.
The members of congress pay social security taxes.
4-04-2008 @ 6:04AM
MP said...
I apologize for statement about congressmen no paying SS. I should have verified before commenting instead of believing comments made by social freinds.
Claude has good suggestions. Raising cap to high income earners. While extending full retirement to 72 retirement age can be extended from 62 to 65.
I am in my 50s and irrespective of what id going on I believe that SS will be fixed and will be continued.
4-04-2008 @ 1:33PM
Theresa said...
we need more financial literacy in this country so those who are starting out as well as those later in years can have their finances in good order-not learn the hard way- and keep them there- http://liveyourdreams.designingfutures.tv
we can help