Earlier this week Treasury Secretary Timothy Geithner revealed that the Social Security trust fund might be exhausted as early as 2037, which is four years earlier than the estimate last year! The main reason for this adjustment comes from the rising unemployment rate, which affects how much is being paid into the trust fund, tax breaks in the stimulus package, and an increase in demand for benefits. By definition, the Social Security trust fund is exhausted when they can only pay 76% of benefits.
It’s not all that surprising when you consider that since January 1, 2008, approximately 5.7 million jobs have disappeared and another 4.3 million jobs are now part-time. That’s going to hit the Social Security collections pretty hard.
Medicare is worse off than Social Security and it’s forecast to be exhausted by 2017, two years earlier than was estimated last year. For Medicare, exhaustion means they can only pay out 81% of costs. The cause is again rising unemployment, since it’s funded from payroll deductions, and what’s especially shocking is that it has paid out more than it collected starting last year.
Experts say the only way to fix it is for broader healthcare reform…
Recession hits Social Security hard [CNNMoney.com]