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The Outlook for Social Security and Medicare Remains Grim

The Outlook for Social Security and Medicare Remains Grim

Thursday, 07 June 2018 02:58 PM Current | Bio | Archive

The Outlook for Social Security and Medicare Remains Grim

For most retirees, their focus in retirement revolves around two things: maintaining enough income to live comfortably, and staying healthy. With the cost of living continuing to rise every year, and with healthcare costs rising far faster than most other costs, both of those are becoming more and more difficult to achieve. And it’s particularly difficult for individuals who rely on Social Security and Medicare.

While prudent financial planning means not expecting to rely on Social Security, many retirees believed that the government would follow through on its promises to pay their Social Security benefits. And with Medicare, many seniors may have no choice but to take Medicare coverage, as it may be their only affordable healthcare option. But both Social Security and Medicare are far short of the funds they need to operate successfully into the future, meaning that seniors who rely on those two programs could be in for a very rude awakening.

Social Security Trust Fund Bankrupt in 2034

The good news for those expecting to receive Social Security in the future is that the Social Security trust fund’s financial situation doesn’t seem to have deteriorated too much since last year. The fund is still expected to be depleted in 2034. This year the total cost of Social Security is expected to exceed total Social Security income, although Social Security tax receipts have already failed to cover costs since 2010.

After 2034, Social Security receipts will only be sufficient to cover about 75% of expected Social Security benefits, down from the estimates of 77-78% of the past few years. So if you’re expecting to receive Social Security benefits in the future, at best you’ll get three-quarters of what you had hoped for. And of course, by the time 2034 rolls around, the actual numbers may be even worse.

Medicare Trust Fund Bankrupt in 2026

If you thought Social Security was in bad shape, Medicare is even worse. Its trust fund is expected to run out in 2026, three years earlier than was predicted just last year. That’s very worrying for those seniors who rely on Medicare for their healthcare coverage. After 2026, Medicare will only have enough money to pay out 91 percent of projected costs.

That means that Medicare in all likelihood will have to reduce its payments to healthcare providers, which will mean that either healthcare providers will have to eat those losses, or they’ll stop taking Medicare patients. And that wouldn’t be good for retirees who depend on Medicare for their healthcare.

What’s even worse is that the current projections for both Social Security and Medicare are predicated upon the assumption of consistent annual economic growth rates of around 2.5%. In the event of another recession or financial crisis, growth rates would shrink or turn negative, while tax receipts would decrease as well. That would further reduce the amount of money available to pay for Social Security and Medicare benefits and hasten the demise of those two programs.

How to Protect Yourself

It will be increasingly important for retirees to be able to support themselves in retirement, both in terms of normal living expenses and in terms of providing for their own healthcare. And with the cost of healthcare coverage continuing to increase significantly each year, that means saving up more and more money before retirement.

The writing has been on the wall for years, with experts having predicted the unsustainability of Social Security and Medicare for decades. Congress doesn’t seem interested in providing any sort of fix, as that would mean either raising taxes to cover the eventual shortfalls, or curtailing benefits. Neither one of those is a winner politically, so the can keeps getting kicked down the road.

Many retirees have undoubtedly gotten wise to the fact that they can’t rely on Social Security and Medicare in the future, and they’ve made plans to provide for themselves by building up their savings. But for those who haven’t, it’s not too late. There’s still nearly a decade left to make provisions before Medicare starts to fail, and over 15 years until Social Security won’t be able to keep its promises. That’s plenty of time to initiate and execute a retirement plan that will protect you against any eventual failure of Social Security and Medicare.

You’ll have to invest in high quality assets, and here’s where we come back to the possibility of recession or financial crisis. With stocks currently still near record-high levels, and with interest rates continuing to rise, neither stocks nor bonds are likely to show continued growth into the future. It’s far more likely that we’ll see a significant drop in prices before we see any more growth, and that can set back your saving and investing goals by years, putting you at risk when Social Security and Medicare aren’t able to pay out 100%.

That’s why more and more investors are beginning to invest in gold. When financial markets look like they’re about to enter a downturn, gold really shines. It protected investors’ assets during the financial crisis and will continue to do so during the next financial crisis. In fact, gold’s annualized growth is more than double that of stock markets this century, which many investors aren’t aware of.

If you’re already invested in stocks and want to lock in those gains before things turn south, it’s worth looking into investing in gold. With a gold IRA you can transfer existing stock and bond IRA retirement assets into gold tax-free, while still continuing to enjoy IRA tax advantages into the future. So if you’re looking into protecting yourself against the difficulties that will eventually crop up with regard to Social Security and Medicare, you owe it to yourself to think about investing in gold.

Trevor Gerszt is America's Gold IRA Expert, CEO of Goldco Precious Metals, and holds a position on the Los Angeles board of the Better Business Bureau.

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The Outlook for Social Security and Medicare Remains Grim
social_security, socialsecurity, social-security, medicare bankrupt, ira, finance
Thursday, 07 June 2018 02:58 PM
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