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Watch Out!

June 21, 2012 by Four Percent

Gene Epstein, Barron's For years, politicians and retirees could safely ignore the crisis facing America's Social Security system. The problems lay in a distant, hazy future, far beyond the next Election Day and the next round of golf. That is now changing; the ground is starting to shake. The first of America's 78 million baby boomers are turning 66, which means they're eligible for full Social Security benefits. Last year, this same group began to qualify for Medicare, whose enrollment age is 65. A goodly number of boomers have been receiving reduced Social Security benefits since 2008, when the oldest turned 62. Nearly a third of all Americans turning 62 in 2010 opted for early Social Security. In short, the future has arrived, and it doesn't look pretty. The boomers in their 60s and the legions after them will put pressure on federal programs that support the elderly for years to come, according to projections by the nonpartisan Congressional Budget Office. The surge will fuel a process that eventually renders these programs too expensive to sustain. More ominously, the federal budget's burden of eldercare will get heavier, not lighter, even after the boomers leave the scene completely. As the chart below illustrates, the costs of eldercare are rising faster than the growth of gross domestic product. The Social Security and Medicare parts alone, at 8.5% of GDP last year, will nearly double their share in 50 years, and keep rising from there. Add to Social Security and Medicare all other health-care entitlements, including Medicaid and "Obamacare," and federal revenues as we know them get nearly swallowed up as soon as 2035. Read More