In New Way to Care, John Goodman argues there are three important things to know about Social Security and Medicare.First, the two programs comprise an enormous portion of the wealth of most people at or near the age of retirement. Take a 60-year-old couple who together have earned an average income for most of their work life. If this couple retires at age 62, the present value of their expected Social Security benefits will be $1.2 million! If the couple waits to draw benefits until they reach the age of 70, their Social Security wealth will be $1.6 million. The value of Medicare is a little harder to calculate, but a reasonable estimate for a couple reaching the age of 65 is that Medicare’s health insurance coverage for the rest of their life is worth about $720,000. The average senior, therefore, is actually a millionaire in terms of entitlement spending wealth—even if they don’t have a penny in their bank account.Second, the entitlement wealth of seniors depends entirely on the willingness and ability of the federal government to tax young people.

The third thing you need to know is that the gap between the benefits we are promising to future retirees and the taxes that will be available to pay those benefits has been growing.

Social Security and Medicare are not the only programs that are promising future benefits to be paid by future taxpayers. Boston University professor Lawrence Kotlikoff estimates that the present value of the unfunded liability for all federal government programs is $210 trillion, an amount roughly equivalent to $654,205 for every person in the United States.

Further, waiting to solve the problem only makes the situation worse.

Doing nothing until 2023 would require a permanent 63% increase in all federal taxes to eliminate the total unfunded liability, while waiting until 2043 would require a 77% hike. An alternative would require a 40% permanent cut in all federal entitlement benefits starting in 2023. By 2043, it would require a 46% cut.

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