SS and Medicare, how much longer?

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itera's picture

New calculations:

Medicare will only be able to pay 87% of expected costs by 2024 and 67% by 2050

Social Security, the trustees estimated that the program will only be able to pay roughly 75% of promised benefits starting in 2033.  SS has already begun paying out more in benefits than it takes in from workers’ payroll taxes.

http://money.cnn.com/2012/04/23/news/economy/social_security_medicare_trustees/index.htm?hpt=hp_t3

I’m still very far from retirement, but all this says to me is 1) big tax increases 2) reduced benefits or  3) both

I think Medicare may become a capped benefit at some point, something like 5% of the Medicare population actually eats up 30-40% of the entire pot of spending. If you capped those people at $X max per year, that number will be reduced greatly.   [edit: private insurance works like this already]  makes sense to me

SS I never had much hope for, but with a huge generation of Americans getting old and will be wanting their money, I doubt any politician will have the balls to kill it off. 

All I see is further kicking the can until some huge kaboom happens, then we’re screwed. 

Hope. It is the quintessential human delusion, simultaneously the source of your greatest strength, and greatest weakness.

Palantir's picture

More importantly, what are some investment ideas based on this? Not only this but underfunded corporate pensions as well.

Not all men were meant to dance with dragons.

The Righteous Hacksaw's picture

Eventually wealthie people will probably get less assistance and inflation will take care of the rest.  Unlikely that it will just go away. Pandoras box is already opened.

No Homo

ohai's picture

When we are 70, just vote in large numbers to postpone paying debt to the generation after us. Problem solved!

“Be aware of this 40 year old men in our country.They suffer from mid life crisis and are always trying to be in the good books of young girls.” -Rahul Roy

krazykanuck's picture

Palantir wrote:

More importantly, what are some investment ideas based on this? Not only this but underfunded corporate pensions as well.

Also is there any country that I can run away to to avoid all of this? I don’t want to pay insane taxes to pay for the prior generation’s idiocy.

Obviously Canada, US, prob Australia, Western Europe are all out…

BValGuy's picture

Palantir wrote:

More importantly, what are some investment ideas based on this? Not only this but underfunded corporate pensions as well.

Best thing you can do is simply assume $0 in SS payout upon retirement.  If you end up receiving anything, it will just be gravy.

krazykanuck's picture

BValGuy wrote:

Palantir wrote:

More importantly, what are some investment ideas based on this? Not only this but underfunded corporate pensions as well.

Best thing you can do is simply assume $0 in SS payout upon retirement.  If you end up receiving anything, it will just be gravy.

Yeah I consider payroll taxes to be adtl income taxes. I assume those programs will be broke or hope I will be so well off that I get phased out.

higgmond's picture

BValGuy wrote:

Best thing you can do is simply assume $0 in SS payout upon retirement.  If you end up receiving anything, it will just be gravy.

This has been my strategy since I entered the workforce 20 years ago.  My SS payments go toward my parents’ benefits, so I’m fine with that.

I got nothin’

ohai's picture

In theory, your parents’ past contributions are supposed to pay for their benefits. I guess that would be the case if the government didn’t keep robbing the general fund…

“Be aware of this 40 year old men in our country.They suffer from mid life crisis and are always trying to be in the good books of young girls.” -Rahul Roy

revaccountant's picture

House Democratic leader Nancy Pelosi said, “Despite the repeated efforts of Republicans to privatize Social Security and end the Medicare guarantee, these vital initiatives remain strong. Today’s Trustees’ report affirms that Social Security and Medicare will continue to provide critical benefits to seniors and other Americans.”

AFL-CIO President Richard L. Trumka said in a statement that the report “confirms that Social Security remains a vibrant, strong, and durable program….The Social Security surplus is large and growing. Despite lower than expected wage and economic growth and unexpected increases in the cost of living, Social Security will be able to pay full scheduled benefits at least until 2033 absent congressional action.”

http://nbcpolitics.msnbc.msn.com/_news/2012/04/23/11355323-social-security-trustees-see-earlier-fund-depletion-date?lite

pheeeww i got really worried for a second….  stop fear mongering iteracom, no issues here

itera's picture

The party responsible for the creation of both Medicare and SS, are saying that these two money draining programs are still essential ?? 

we got a headline story here, call the wall street journal !

Hope. It is the quintessential human delusion, simultaneously the source of your greatest strength, and greatest weakness.

infinitybenzo's picture

http://www.youtube.com/watch?v=D6Q14HOBThM

This dude explaines quite well

Be yourself. The world worships the original.

bodhisattva's picture

krazykanuck wrote:

Palantir wrote:

More importantly, what are some investment ideas based on this? Not only this but underfunded corporate pensions as well.

Also is there any country that I can run away to to avoid all of this? I don’t want to pay insane taxes to pay for the prior generation’s idiocy.

Obviously Canada, US, prob Australia, Western Europe are all out…

Check your assumptions, ‘socialist’ governments have proved themselves to be far better fiscal managers.  Canada’s version of SS will not run out for atleast 75 years.

http://www.cppib.ca/faqs.html#f1

We also dont have medicaid, almost our entire healthcare system is single payer and has proven itself to be far less costly then the United States.

http://www.nejm.org/doi/full/10.1056/NEJMsa022033#t=articleBackground

See the results section.

ohai's picture

I’m pretty sure that if the US goes down, Canada is going with it…

“Be aware of this 40 year old men in our country.They suffer from mid life crisis and are always trying to be in the good books of young girls.” -Rahul Roy

higgmond's picture

Canada has fewer people than the State of California.  Kind of hard to compare that to the US and say what works there will work here.

I got nothin’

bchad's picture

The US accounts for nearly 3/4 of Canada’s exports.  If the US crashes and the dollar becomes worthless, Canada’s exports are going to crash dramatically too.  And I don’t have the figures in front of me, but exports make up a very large part of Canadian GDP.

So yes, unfortunately, if the US rolls over, Canada is going to get crushed, whether they’ve been responsible or not.  But they do have nice doughnuts to comfort them while they sit and collect on their chesterfields.

You want a quote?  Haven’t I written enough already???

Sweep the Leg's picture

I think social welfare is drastically misunderstood.  The answer is more, not less.  If social security is running out of money the government should start social work programs to ensure middle class Americans always have the ability to generate steady income to adequately plan for retirement. 

As for Medicare, the simple answer is for the government to provide universal coverage for all Americans.  Blanket coverage will ensure a healthier America.  Healthier Americans means lower long-term health care costs.

BValGuy's picture

^On the other hand, much of these exports are natural resources that the US is dependent upon.  Other than timber (housing mkt crash), I see many of the products (oil, water, etc) coming from Canada as having very inelastic demand curves.  And we’ve already had a housing crash and evidently Canada is unscathed.

krazykanuck's picture

BValGuy wrote:

And we’ve already had a housing crash and evidently Canada is unscathed.

There’s a thread over in the investment’s section about Canadian real estate and it’s recent rise. I see it as a bubbleish rise in value over the last few years. It hasn’t happened yet, but the market will definitely see it’s own correction, but who knows what will happen once interest rates begin to rise again. I doubt we’ll see something as bad as what the US has seen though.

former trader's picture

bchadwick wrote:

The US accounts for nearly 3/4 of Canada’s exports.  If the US crashes and the dollar becomes worthless, Canada’s exports are going to crash dramatically too.  And I don’t have the figures in front of me, but exports make up a very large part of Canadian GDP.

So yes, unfortunately, if the US rolls over, Canada is going to get crushed, whether they’ve been responsible or not.  But they do have nice doughnuts to comfort them while they sit and collect on their chesterfields.

The US went through a severe recession from 2007-2009 and the Canadian dollar has gained 20% over the USD, yet the Canadian economy caught a mild cold.  It took less than a year for employment to reach it’s pre recession level.  It’s a resource based economy.  As mentioned above, demand for our resources is inelastic.

Telling it like it is on AF since 2007.

bchad's picture

Yes, the resource base helped Canada, and this meant that a severe recession in the US didn’t result in a super severe recession in Canada.  In part that’s because Canadian banks were healthy, and in part that’s because China stimulated and the US stimulated and it drove up the price of resources, particularly oil.

The scenario that’s being talked about here is a complete and utter collapse of the dollar and the US economy so bad that Americans with means will be fleeing the country.  I don’t see Canada escaping the repurcussions from that.  Sure, the C$ will strengthen, and then Canadian exports will be fantastically expensive.  Even the domestic economy will be under pressure because Canadians with means will be importing things.

You want a quote?  Haven’t I written enough already???

purealpha's picture

krazykanuck wrote:

Also is there any country that I can run away to to avoid all of this? I don’t want to pay insane taxes to pay for the prior generation’s idiocy.

Obviously Canada, US, prob Australia, Western Europe are all out…

As finance people we should all know the time to run for the door is before the herd catches a clue and jams the exits in a panic.  My theory is that countries are going to start tightening citizenship rules (and already are doing so); nobody wants a bunch of broke Americans flooding their borders.  People say “oh it’s fine, maybe in 50yrs it will be a problem” but to me that’s just ego, “it can’t happen to us”, “we are too important to fail”, etc.   Everyone has to make their own call, but for me; I’m already f@#$%# gone, citizenship elsewhere is pending, and I ain’t payin’ one more penny into that dying system thank you very much!  :)

bodhisattva's picture

Im going to Thailand, all the muay thai, yellow curry and ladyboys a guy can handle.

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