Social Security and Medicare are 2 core social programs. And although they are core, what are the social security costs?
Program Funding
Social Security and Medicare are funded by income taxes. They are partially paid by the individual taxpayer and partially paid by their employers.
Program Costs
Each program’s costs are shooting through the roof because of demographics. The Baby Boomers have started retiring.
They have enrolled in Medicare.
They have started their Social Security benefits, which can start as early as 62 or delayed to the age of 70.
And, that wave has started.
“What’s frightening is the Baby Boomers haven’t really started to retire,” says University of Michigan economist Donald Grimes of the 77 million people born from 1946 through 1964 whose oldest wave turned 65 in 2011. “That’s when the cost of Medicare will start to explode.”
A record 18.3% of the nation’s total personal income was a payment from the government for Social Security costs and Medicare costs in 2010. Wages accounted for the lowest share of income — 51.0% — since the government began keeping track in 1929.
From 1980 to 2000, government aid was roughly constant at 12.5%. The sharp increase since then — especially since the start of 2008 — reflects several changes: the expansion of health care and federal programs generally, the aging population and lingering economic problems.
Retirees Rely On Social Programs
The pressure on these social programs will only continue through time, until Baby Boomers start to fade away.
Starting to plan now on the role Social Security will play in your retirement will help you put context around these crucial programs.
Next Step
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