Take a look at an average American couple, who earned the average income during their lives and retired at the age of 65. Together, they earned about $47,000 in their final year of work. They would receive a joint Medicare benefit valued at $283,500.* The reality is, they would have paid only $43,000 in Medicare taxes during their working years. This represents a $240,000 loss to the government. Remember, this is only ONE husband and wife.

The government’s problem with the average 65-year-old retiree doesn’t end there. Although this average couple paid $198,000 in Social Security taxes, longer life expectancies will create an average $326,000 in Social Security benefits for this couple. Between Medicare and Social Security, the government, for this average couple, paid out $368,000 more in benefits at retirement than the couple paid in. To make things worse, the benefits for these programs increase every year. Finally, the Social Security and Medicare trust funds have no money in them, only IOUs that future taxpayers must pay.** Unfortunately, the children of this average couple, who are 40 to 45 years old, now will receive projected benefits 45% higher than their parents, costing the government about $884,000 when they turn 65.

No one should expect this problem to go away. The changing demographics are certain to happen. The questions remain: Who will pay for this, and how much will future taxation have to increase to maintain these benefits?

*"The Looming National Benefit Crisis,” by Dennis Cauchon and John Waggoner, USA Today, October 3, 2004. 

**  "Truth and Transparency: The Federal Government’s Financial Condition and Fiscal Outlook,” by Hon. David M. Walker, Journal of Accountancy, April 2004.