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Why the Presidential Candidates Aren't Talking About Retirement Issues

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RubberBall—Alamy

The presidential election campaign has dragged on for months, but the candidates have yet to seriously address one of the most important issues: How to finance the cost of Social Security and Medicare benefits for the nation’s growing numbers of older citizens. Both entitlement programs are on unsustainable spending paths, and continuing to ignore the problem means the cost of a fix will soar even higher.

Fuzzy government spending proposals from Republicans Ted Cruz and Donald Trump would lead to even larger federal deficits, according to many economists. Ditto for the spending plans of Democrat Bernie Sanders. Hillary Clinton has issued detailed proposals to expand Social Security and protect Medicare from budget cuts. She also would raise taxes to help pay for these proposals. But cutting overall federal deficits has not been a campaign objective.

A recent set of spending projections from the non-partisan Congressional Budget Office shows a scary set of numbers:

Meanwhile Social Security is now spending more each year than it takes in, and the trust funds will be depleted in 2034. At that time, payroll tax collections will only bring in enough revenue to cover about three-fourths of promised benefits. And Medicare's hospital fund will run out in 2030.

Solving these shortfalls won't be easy. Whenever Washington finally decides to deal with them, you can expect a fierce battle between fiscal hawks pushing to reduce benefits and those seeking to maintain or even increase them. Still, I don't see any way to deal with these deficits without a combination of higher taxes and benefit cuts.

What can you expect in the way of specific changes? I don't have a crystal ball, but it's increasingly likely that Social Security and Medicare will no longer be universal benefit programs. Instead, they will evolve into welfare programs, with benefits even more sharply skewed to lower-income recipients. Wealthier Americans, who have been paying more for these benefits, may end up paying more and possibly receiving lower payments in return. Here are the major proposals you can expect to hear about:

New Limits for Social Security

The good news is that Social Security is fixable, given a few changes. We missed a great chance to do this when the 2010 Simpson-Bowles plan could not muster enough political support. Specific numbers for possible adjustments have changed, but the basic choices are the same.

Medicare Becomes Managed Care

Medicare is a far more difficult funding challenge. Payroll taxes for Medicare do pay for Part A hospital expenses. But consumer taxes and premiums for other parts of Medicare—Part B for doctors and outpatient expenses, Part C for Medicare Advantage insurance, and Part D for prescription drugs—paid only about 28% of total costs. The other 72% was paid directly by taxpayers, and totaled nearly $250 billion in 2014, according to the 2015 Medicare Trustees’ report.

Calculator: I'm retired, how long will my savings last?

Given these unappealing options, perhaps the failure of the presidential candidates to grapple with retirement issues is only to be expected.

Philip Moeller is an expert on retirement, aging, and health. He is co-author of The New York Times bestseller, “Get What’s Yours: The Secrets to Maxing Out Your Social Security.” A revised edition explaining the new Social Security rules will be published May 3. His companion book, “Get What’s Yours for Medicare: Maximize Your Coverage; Minimize Your Costs,” will be published in October. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

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