Who Gets The Best Return From Social Security and Medicare?

You might smile when you compare what you pay for Social Security and Medicare to the benefits you receive.

But not necessarily.

It could all depend on how much you earn:

Social Security and Medicare Returns

We could call Social Security and Medicare defined benefit programs because, as participants, we know how much we will receive. Furthermore, Social Security is pay-as-you go. This name just means that today’s “checks” come from the taxes paid by today’s workers. And that is a part of the problem.

Because the number of births per woman is dipping, our labor force might grow more slowly unless immigration makes up the difference. In 1960, in the U.S., the average births per woman was 3.65 . Now, we are down to 1.7:

Meanwhile, on the recipient side, we are living longer and also have a larger than normal number of Baby Boomer retirees.

Our Bottom Line: The Trustees Report

While the Trustees for Social Security and Medicare gave us some good news in their annual report, it is all worrisome. The trust funds that each created when they had a surplus will be depleted a bit later than they predicted last year. For Social Security, the date is 2034 and Medicare, 2028. However, once they don’t have a trust fund to offset inadequate funding, then, without changes in the programs, retirees will be paid 77 percent. For Medicare, the total is closer to 90 percent.

Returning to where we began, we could see the projected lifetime benefits diminish and taxes rise.

My sources and more: This CNBC analysis is the best I’ve read for the 2022 Trustees Report. Combined with the Urban Institute Report on our Social Security and Medicare return, we have the whole picture.