Social Security and Medicare: The Boomer Crunch
In 2006, Kathleen Casey-Kirschling and the rest of the initial Baby Boomers officially turned 60. In 2008, they will turn 62 and be eligible to start drawing early retirement benefits from Social Security. Three years later, they'll be 65 and eligible for Medicare.
And this creates a problem.
According to the 2007 Annual Report from the Social Security and Medicare Board of Trustees, Social Security will start to cost more money to run than it takes in by the year 2017. There is currently a large surplus, but it will be drained by the year 2041. At that point, Social Security will only be able to pay out 75 percent of its benefits.
The news on Medicare is even worse. We dip into the Medicare surplus in 2013, and drain it by 2019. Then Medicare can only pay for 79 percent of its costs.
The reason for this short fall? The Baby Boomers.
Social Security and Medicare are paid for mostly through payroll taxes. The more people that work, the more money that goes into the systems. For many, many years, the Boomers did their part, worked their jobs, and put money into the system. Since there are so many Boomers, there were a lot more people putting money into the system than taking it out.
But when the Boomers start to retire, we will lose a huge group of people putting money into the system and replace them with a huge group of people taking it out of the system.