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Social Security and Medicare: Do you get back what you pay in?

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Numbers might better illustrate these points. At the Urban Institute, C. Eugene Steuerle and Caleb Quakenbush have been studying these issues for some time. According to their updated 2012 figures, a single male earning the average wage who retired in 2010 will receive total lifetime Social Security and Medicare benefits worth $457,000, following total lifetime tax contributions of $361,000. So he’ll be $96,000 in the black.

Such a person who retires in 2020 would be $109,000 in the black. A 2030 retiree would get back $156,000 more than he put in. So, as things stand at the moment, retirees will get increasingly generous transfer payments from working taxpayers as the decades roll by.

The trend line is even better for a two-earner average-wage couple. If they retired in 2010, they’ll get back $244,000 more in benefits than they contributed in taxes. Such a couple who retires in 2030 would be $379,000 to the good.

But again – maybe we can’t emphasize this enough – the apparent largesse on the part of Uncle Sam is largely a result of the rising cost of Medicare, which in turn is driven by health-care cost inflation.

The single male of average earnings who retired in 2010 is projected to get back three times as much in Medicare benefits as he contributed in taxes, for instance. The working couple will reap the same benefit/tax ratio.

This should not be surprising. The rising cost of health care in general is one of the most important fiscal problems facing the United States. Medicare is only one aspect of this, albeit a big one.

“The path of health care spending for seniors relative to taxes and premium revenues is unsustainable in the long run,” write the Urban Institute’s Mr. Steuerle and Mr. Quakenbush in a study of Medicare lifetime benefit calculations.

Until recent years, Social Security was in the same boat, actuarially speaking. Recipients often received much more in income support benefits than the value of the Social Security taxes they’d paid.

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