Government Spending on Retirement Programs is on the Rise
Since the financial reforms of the early 1980s, the Social Security trust funds have taken in more money from taxes than they have paid out in benefits, resulting in a contribution to savings each year. However, this trend reversed in 2018 when the program spent more than it made. As life expectancies rise and baby boomers begin to reach the age of retirement, this trend is expected to continue. The retirement age, which is currently set at 66 years and 2 months, may need to increase to help fund government obligations to of an aging population.
Seniors today are much better off as a group as compared to previous years. In 1959, 1 in 3 seniors lived below the poverty line; today that statistic is fewer than 1 in 10. In 2017, elderly families in the lowest 40% of income earners on average receive more from government than from other sources of income (Fig. 54).
The primary public vehicle for retirement benefits is Social Security; 52 million Americans collected an average of $15,784 each in Social Security benefits in 2018 (Fig. 52).
As of 2017, the average cost per Medicare enrollee was $13,185—an increase of $398 since 2008, adjusted for inflation (Fig. 53). However, with 58 million enrollees—28% more than in 2008—program costs grew to $695 billion in 2018. Medicare is also partially funded through payroll taxes. Employees and employers each pay 1.45% of an employee’s salary towards Medicare and 6.2% towards Social Security. The Social Security tax is removed on earnings above $132,900, whereas the Medicare tax is applied to all income and includes an additional 0.9% tax on earnings of individuals with incomes above $200,000 (single) and $250,000 (married).