On January 31, 1940, the first monthly retirement check was issued to Ida May Fuller of Ludlow, Vermont, in the amount of $22.54.

A legal secretary, Fuller retired at age 65 and lived to be 100 years old. Until she passed away in 1975, she had collected a total of $22,888.92 in Social Security benefits.

Today, many wonder whether they’ll have the good fortune, like Ida May, to receive full Social Security and Medicare benefits upon retirement.

Without a doubt, 2018 will go down as a rather inauspicious year for Social Security and Medicare.

For the first time in 36 years, benefits under both programs will be paid from reserves (assets) rather than from interest earned on reserves—and these reserve drawdowns are projected to continue every year until program assets are depleted.

Is this the beginning of the end for Social Security and Medicare?

Probably not.

While it’s true that rising costs—largely due to the retirement of baby boomers—will more or less drain Social Security reserves (a trust fund of almost $3 trillion) by 2034, this won’t mean the end of payouts.

It could, however, mean reduced payout amounts.

By 2034, it’s estimated that projected revenues will only cover about three-quarters of the program’s current benefits. There will simply be too few wage earners for each Social Security beneficiary and too many retired baby boomers.

Medicare isn’t anticipated to fare much better.

The Medicare hospital trust fund is expected to run out of money in 2026, three years earlier than previously projected. Reduced payroll revenues and higher payments than expected to hospitals and private Medicare plans are to blame.

So is it time to worry?

We think not. While Congress will need to act well before 2034 to restore long-term balance and continue current benefits, we believe that benefits are at little risk of going away entirely.

Social Security has been “saved” before, when Alan Greenspan led efforts in the 1980s to stabilize a trust fund projected to be mere months away from depletion.

For Social Security and Medicare to stay afloat into the future, entitlement changes will most likely be required. A few possibilities may include raising the payroll tax rate, raising the amount of earnings subject to the payroll tax, and/or raising the full retirement age.

Until Congress tackles these decisions, you might want to consider what you want your retirement to look like rather than spend time worrying about the future of Social Security and Medicare.
If you have questions or would like to discuss your options in greater detail, we are here to help.