Using updated data from the 2023 Social Security and Medicare trustees’ reports, Urban Institute fellows C. Eugene Steuerle and Karen E. Smith have modeled lifetime benefit and cost figures for different cohorts of future retirees. They attempt to give policymakers some baselines to make more informed decisions on soon-to-be-inevitable changes to the two programs. 

Their report highlights how much people can expect to receive and pay into the Social Security and Medicare systems over their lives. Most importantly, it shows how people retiring in different years receive different benefits compared to older and younger Americans.

A Word of Caution

First off, it’s important to acknowledge that the report’s calculations are based on simulations. Using a tested Urban Institute model, the authors estimate how much people in different situations will get from Social Security and Medicare, as well as how much in taxes they’ll pay beforehand. The figures are all put into 2023 dollars, which means that they’ve already adjusted for inflation — after all, a dollar today isn’t worth the same as a dollar in 50 years. 

They also assume a general scenario where the programs still continue to pay out benefits and adjust for things like rising wages over time. These assumptions, they argue, mirror standard or close-to-standard practice from the Social Security Administration and the Centers for Medicare & Medicaid Services.

What to Know

The report’s primary takeaway is that, on average, most groups of people will continue to receive more in total lifetime benefits than they’ll pay in taxes. Because of longer lifespans, increases in real wages, and rising health care costs, people will receive more in retirement than previous generations did. For example, the model predicts that a single average-earning male who retires in 2050 would expect to receive an estimated $1,082,000 in lifetime benefits from Social Security and Medicare. Then, compare that to the $644,000 he’ll pay in lifetime taxes to both programs to see the trend. 

Although the degree varies based on sex, income, and marital status, most people are expected to benefit from the trend. We can also do this over time as the model allows for comparisons between different retirement ages. If that same single male were born 10 years later and retired 10 years later, he’d pay $86,000 more over his life. But he’d also receive $188,000 more in total benefits.

The Report in Action

Source: https://www.urban.org/sites/default/files/2023-10/Social%20Security%20and%20Medicare%20Benefits%20and%20Taxes%202023.pdf

The table above is one of many from the report. Each table calculates benefits and taxes for different groups of people. In this case, the numbers correspond to an average-earning married couple, but there are also other tables for single men or women with different financial backgrounds. 

If we want to see how much different people are expected to receive, we just need to look at the retirement years. As one example from the table, an average-earning married couple can expect to receive about $1.77 million in total lifetime benefits if they retire in 2035.

What Does This Change?

Like any other time we try to look into the future, our view is imperfect. This paper’s strength is that it gets us closer to what we should expect. For Social Security and Medicare in particular, more accurate predictions allow policymakers to see where changes might be the most effective. 

Based on the authors’ findings, they suggest that there is room to change tax or benefit practices while still preserving financial and health-based well-being. At the same time, their different calculations for different groups of people allow us to quantify how changes will affect different Americans. As policymakers continue to debate between avenues to pursue, papers like this one offer insight into how much better or worse off future Americans will end up.