Can I Count on Social Security?

You can debate whether life is just beginning or you are over the hill when you reach the big four-oh. But if you're 39, you've got another worry: Social Security.The 2009 Social Security trustees' report shows that by 2016, tax revenues flowing into Social Security will be less than the benefits paid out. By 2037, the program's trust fund will be depleted -- just when today's 39-year-olds will be reaching full retirement age. That's four years earlier than the trustees predicted last year, mostly because the recession has pressured payroll-tax revenues and because people are expected to live longer.

An earlier day of reckoning isn't good news, but neither is it an insolvency crisis, says law professor Neil Buchanan, of George Washington University. A depleted trust fund doesn't mean the account is empty; new tax revenues will still pay for 76% of benefits promised in 2037. Plus, even after accounting for inflation, payouts are expected to rise along with increases in GDP growth and productivity over the 75 years the trustees projected. So future beneficiaries may be better off than their counterparts today, even if benefits are trimmed.

If lawmakers act soon, they may avoid tax hikes and drastic cuts in future benefits. But, says Chuck Blahous, of the Hudson Institute, the window of opportunity won't last.

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For now, Medicare's crisis trumps Social Security's. Medicare's Hospital Insurance trust fund will be depleted by 2017. And over the next two years, monthly premiums for Part B, which covers doctor visits, are expected to jump for new and high-income enrollees.