Repeat After Me: There’s No Such Thing as Socialsecurityandmedicare

You may see some headlines today that report on a new study showing that boomer retirees will receive way more in Social Security and Medicare benefits than they pay in taxes. But be careful. Technically, that’s true, but it’s like saying the combined population of China and Vietnam is 1.4 billion. It’s true, but all the heavy lifting is being done by China.

In this case, all the heavy lifting is being done by Medicare. According to the latest estimates from the Urban Institute, current workers are paying far less in Medicare payroll taxes than they’ll eventually receive in health benefits when they retire. (Just as current retirees are receiving more benefits today than they paid in taxes during their working lives.) That’s a problem, and it’s the reason we need to focus so much attention on rising health care costs.

But Social Security? It varies a bit depending on whether you’re single or married, but generally speaking taxes and benefits are pretty similar. The chart below shows the Urban Institute’s estimates for workers who will retire in 2030, and it’s pretty obvious that future retirees aren’t getting an especially sweet deal here. They’re just getting back what they put in.

Generally speaking, you’re always being conned when people talk about “entitlements.” That usually means Social Security and Medicare, but they’re very different things. Social Security is fine, and will stay fine with nothing more than tweaks. Medicare is a bigger problem, and it’s the one that needs the most attention.