Why do Social Security and Medicare pose problems for the federal government budget? Because of demographic changes, the United States Social Security system is going to face financial problems in the upcoming years. With life expectancy increasing and health care improvements, the U.S. population is simply living longer. Right now, 12% of the U.S. total population is 65 years old or older. However, by 2080, the percentage will increase to 23%.
There are 3 main reasons why these two programs are problematic to our government:
- The worker-to-retiree ratio is decreasing.
- The life expectancy of people retiring is increasing.
- The total number of retirees is increasing annually.
Decreasing worker-to-retiree ratio
The worker to retiree ratio is measured by the number of people employed in Social Security covered jobs and divided by the total number of people receiving Social Security benefits.
The United States worker-to-beneficiary ratio has decreased from 5.1 in 1960 to 3.3 in 2005. Some of this decline is attributed to the pay-as-you-go maturation of a social insurance program. However, the aging population will be responsible for the future projected decline.
The ratio is extremely important to our country’s Social Security program and its financial health. Our system requires a 2.8 worker to beneficiary ratio in order to operate as a “pay as you go” system. This ratio is projected to decrease by 2014 to 2.1 by the Social Security Trustees.
Rising Life Expectancy
As Americans have grown older, we have constructed a situation that future workers will have the burden of supporting an expanding retiree population. This has sparked debate on increasing retirement ages. The changing of the “normal” retirement age from age 65 to age 67 by 2025 may not go far enough to offset the projected increase in life expectancies.
In 2018, the U.S. Social Security trustees and Medicare trust funds have projected that, under the current law, Social Security expenses will start to exceed payroll tax revenue. It is also projected that that the S.S. trust fund will be exhausted by the year 2042.
Retirees are increasing in numbers
The total number of retirees getting Social Security benefits has risen over the past decade. It has increased from:
- 33.5 million in 2009
- 45.1 million in 2019
This number has risen annually at this rate over the last decade. It is projected to continue at this rate into the future.
Resources
Michael Quinn is an independent licensed insurance agent with a passion for helping others navigate the complex world of Medicare insurance. With over a decade of experience in the field, Michael has established himself as a trusted advisor to countless individuals seeking guidance on their healthcare coverage options.
In 2013, Michael obtained his license as an insurance agent, laying the foundation for his successful career in the industry. Prior to that, he earned his Masters Degree in Communicative Disorders from the University of Central Florida, which equipped him with strong communication and interpersonal skills.
Driven by a genuine desire to make a positive impact on people's lives, Michael co-founded REMEDIGAP in 2013. It was created as a dedicated platform that aims to educate individuals about Medicare insurance. Through REMEDIGAP, Michael provides comprehensive resources and unbiased information to empower individuals to make informed decisions about their healthcare coverage.
With his extensive knowledge and expertise, Michael has been able to guide thousands of individuals towards finding the most suitable Medicare insurance plans tailored to their unique needs. His dedication to his clients' well-being, coupled with his passion for simplifying complex insurance concepts, has earned him a reputation as a compassionate and reliable advisor.
His work has appeared on many blogs and websites including, USA Today, Yahoo.com, Nerdwallet, Think Advisor, and REAL SIMPLE.
