Federal Retirement Schemes at Risk
March 24, 2004
The federal retirement system is financially unsound and getting sicker faster than expected, according to an annual report by the Social Security and Medicare boards of trustees.
For workers planning to cash in on Social Security and Medicare after 2010, the projections mean they will probably get fewer benefits. And for younger workers, it means higher taxes may be required to finance the retirement of their elders.
Particularly troubling was a forecast that rising medical costs and expanded benefits are pushing Medicare onto the critical list:
- This year, Medicare's Part A hospitalization fund will post a deficit, and the program is forecast to become insolvent by 2019.
- To pay retiree medical bills, it will rely on $7.5 billion it earns on treasury bonds.
- Overall, Medicare -- including payments to doctors and the new prescription drug benefit -- is expected to fall short by $27.7 trillion during the next 75 years.
Social Security is not deteriorating as quickly, but the retirement plan faces daunting fiscal problems. The trustees predicted that Social Security will have a deficit beginning in 2018 and will become insolvent in 2042.
Taken together, Social Security and Medicare are expected to need $31.4 trillion in new funds to meet promises made to retirees during the next 75 years.
Source: Robert Dodge, "Medicare could be broke by 2019: Rising costs, expanded benefits putting federal retiree programs in critical condition," Dallas Morning News, March 24, 2004 and "Status of the Social Security and Medicare Programs: A Summary of the 2004 Annual Reports," Social Security and Medicare Boards of Trustees, March 24, 2004.
For summary of report
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