NCPA - National Center for Policy Analysis

Million Dollar Retirees

May 17, 2011

Starting next year, a typical husband and wife who reach age 66 and qualify for Social Security, receiving the average benefit, will begin collecting a combination of cash and health care entitlement benefits that will total $1 million over their remaining expected lifetime, says John Cogan, a senior fellow at the Hoover Institute.

  • Based on government data, such married couples will begin receiving monthly Social Security checks that will, on average, total about $550,000 after inflation.
  • They will receive health care services paid for by Medicare that, on average, will total another $450,000 after inflation.

Social Security's method of automatically increasing benefits to successive cohorts of retirees by more than inflation makes little sense.

  • It means that the average worker who retires this year receives a monthly benefit that is about 23 percent higher after adjusting for inflation than the monthly benefit received by the average worker who retired 20 years ago.
  • The average worker who retires 10 years from now is, in turn, promised an initial benefit at retirement that is 14 percent higher after adjusting for inflation than the average worker who retires today.

Under the federal government's fee-for-service Medicare program, every time a senior citizen meets with his physician for a check-up, lab tests or surgery, somebody other than the patient foots most of the bill.  

  • Medicare premiums paid by senior citizens once covered half of the cost of physician and related services -- they now cover one-fourth.
  • Copayments once covered nearly 40 percent of these services' costs -- they now cover only 20 percent.

Many believe they rightfully deserve the benefits they have been promised, after spending their working years paying into these programs.  And true enough, the typical 66-year-old couple and their employers, on their behalf, have contributed nearly $500,000 in payroll taxes (in today's dollars) toward these benefits during their working careers.  But the hard reality is that the federal government has already spent it.  No matter how deserving they are, it is younger generations of workers who have to come up with the money, says Cogan.

Source: John Cogan, "The Millionaire Retirees Next Door," Wall Street Journal, May 12, 2011.


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