When we read anything about Social Security and Medicare we read about how the two programs are going to be bankrupt in the next decade.  The simple math is that currently we have approximately 300 million Americans of which approximately 35 million Americans are age 65 or older.  Per Social Security they receive on average approximately $12,800 benefits each.  Fortunately the working population of the United States is about 155 million so we have about $27,400 going into Social Security to pay for $12,800 in benefits.  So, if the Government were good with investments Social Security would be much solvent rather than having a projected $5.3 trillion unfunded liability.   These are easy statistics to quote because they are from the US Bureau of Statistics and the Social Security Administration.

It does not sound bad until we take into account that there are approximately 75 million Baby Boomers who are entering the age when they are eligible for Social Security and Medicare.  So, in the next two decades it is possible that we will have about 100 million Americans eligible for Social Security and Medicare, 50 million Americans under 18 (too young to work) and 150 million Americans in the classic working age category.  Well with 100 million receiving benefits averaging $12,700 (as of May 2009 per Social Security Administration)  and 150 million contributing an average of $6,181. The math proves that Social Security and Medicare go broke.

Yet, the real story is different.  The below chart shows that we do not have the simple most people retire from work as they reach retirement age.  That model began changing starting about 1991.  The reason is that the average worker is no longer doing work that is so physically demanding that youth is needed and as a result, people continue to work past retirement age.

As Peter  Francese’s chart demonstrates people are working longer which means that maybe we will have 200 million people contributing to Social Security rather than only 150 million which means the assumptions that lead us to run out of funds are wrong.