Troubles for US Pension System Worsen

Posted April 23rd, 2012 at 3:55 pm (UTC-5)
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Officials supervising U.S. government systems that provide pensions and medical care to the elderly say the programs are in financial trouble, and the situation has become worse over the past year.

Tens of millions of elderly or disabled Americans rely on the pension program, called Social Security. Millions also count on the health insurance program for people over 65, known as Medicare.

A report Monday says the pension program will deplete its reserves by 2033, which is three years sooner than previously thought. That would mean the system would rely solely on a special tax on salaries for revenue, forcing officials to cut benefits by about one-quarter.

The trustees of Social Security and Medicare say the health care program for the elderly faces a shortfall in 2024.

Treasury Secretary Timothy Geithner says Washington must take steps to keep the programs solvent for future generations.

The problem is that an unusually large generation born just after World War Two is reaching retirement age, increasing the number of people eligible for pensions. Retirees are also living longer than in the past, which also increases pension costs.

The generations that followed the so-called “Baby Boomers” have fewer members, so taxes on them raise less money.

Rising costs and revenue problems mean deficits for the programs. That gives policymakers the difficult choice of raising taxes, cutting benefits or doing some of both.