The Social Security and Medicare Trustees report came out today, about five months overdue.

The topline data is pretty bad.  Social Security is paying out more in benefits than it collects in taxes this year and next, and will do so permanently starting in 2015.  So Social Security is officially in the red.

For Medicare, the report says that everything is fine, unless of course you assume what everyone does–that Medicare-earmarked tax revenues will in fact be used to pay for Obamacare, in which case Medicare is broke.

Most of the analysis has focused on the solvency of the systems.  That's not really the point.  The point is how workers will fare in retirement.  The answer is "not well."  Taxes will be paid over a working lifetime, and borrowing will have to be used on top of that–just to pay current benefits.  Then, in retirement, today's workers will face a worsening situation that will likely result in benefit cuts and/or tax increases.

That's not a good solution.  There is a better way.

If younger workers could pre-fund their retirement by saving their payroll taxes in a 401(k)-style account, they wouldn't need to rely on future taxpayers for their pension and health benefits.  They already would have been pre-funded.  This has been exhaustively-debated for thirty years, but it really is the only way to address the long-term overspending problems involved here.