Get the app
Get the app

Join millions of investors on Stash

Investing, simplified

Start today with as little as $5
Get the app
Money News

Social Security and Medicare Are Running Out of Money

June 06, 2018

  • The Social Security and Medicare trust funds are experiencing financial shortfalls
  • Growing expenses and a less revenue are leading to the shortfall
  • It’s critical now more than ever to set money aside for retirement


2 min read

Both Medicare and Social Security, the two primary federal retirement programs, are running out of money faster than expected. Both agencies released reports about their financial health on Tuesday.

At their current pace of spending, Medicare officials said the trust fund will be depleted by 2026, three years sooner than previously forecast.

Similarly, Social Security officials said the program’s expenses have already exceeded annual revenue, and for the first time since 1982, it has had to dip into a $3 trillion reserve fund to make payments. The Social Security Administration had previously forecast that it would not have to tap reserves until 2021.

At its current pace of spending, the Social Security fund will be out of money by 2034, according to the report.

The shortfalls alarmed experts, and highlight the need for individuals to save for their own retirements.

“The current trajectories in health spending are both unsustainable and unmatched by increases in quality,” Alex M. Azar II, the Secretary of Health and Human services and a trustee of Medicare and Social Security, told the New York Times on Tuesday.

What are Social Security and Medicare?

Medicare is the government-run health insurance program that covers 58.4 million people, primarily retired, for care ranging from hospitalization to prescription drugs. It’s financed through a payroll tax and premiums paid by recipients.

Social Security is a federal program that provides monthly income during retirement. The program sends checks to 62 million people each month. It’s funded primarily through payroll taxes. It currently has a reserve fund of about $3 trillion.

At its current pace of spending, the Social Security fund will be out of money by 2034

Why are the trust funds running out money?

Expenses for the programs are rising slightly, and tax revenues are lower than forecasts, according to reports.

The tax cut legislation approved last year will result in less revenue for government programs, and is expected to increase the annual deficit and the national debt.

A Savings Crisis

It’s important to start saving for your own retirement now.

Americans have a hard time saving, in general. Multiple reports suggest that the average family only has $1,000 in savings. And average retirement savings for all working families is about $95,000.

If you’re making about $40,000 a year now, you’d need to save about $1.18 million to have the same standard of living in retirement, according to AARP.

The average payout from Social Security is $16,464 annually, or about $1,372 per month, according to reports. For most people, that’s not nearly enough to fund a retirement. In fact, the average retired family, defined as a household headed by someone 65 year old and over, spends about $45,756 annually.

Meanwhile, the rising cost of healthcare is likely to take up half of Social Security income by 2030, according to a report from the Kaiser Family Foundation.

Here’s what you can do

People can save for their own retirements via a variety of accounts, including workplace plans such as 401(k)s, self-directed individual retirement accounts, or IRAs and Roth IRAs.

Ready to start thinking about your retirement? Get Stash Retire.   

By Jeremy Quittner
Jeremy Quittner is the senior writer for Stash.

Next for you
Introduction to Retirement

Investment Profile

Bonds Worldwide

An International Bond ETF on Stash

Learn more
Explore more articlesChoose a topic to learn more about
Retirement budgeting politics social media Careers

This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

Furthermore, the information presented does not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. Before investing, please carefully consider your willingness to take on risk and your financial ability to afford investment losses when deciding how much individual security exposure to have in your investment portfolio.

Past performance does not guarantee future results. There is a potential for loss as well as gain in investing. Stash does not represent in any manner that the circumstances described herein will result in any particular outcome. While the data and analysis Stash uses from third party sources is believed to be reliable, Stash does not guarantee the accuracy of such information. Nothing in this article should be considered as a solicitation or offer, or recommendation, to buy or sell any particular security or investment product or to engage in any investment strategy. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Stash does not provide personalized financial planning to investors, such as estate, tax, or retirement planning. Investment advisory services are only provided to investors who become Stash Clients pursuant to a written Advisory Agreement. For more information please visit