Federal Reserve Chairman Ben Bernanke did not paint a great picture on Social Security and Medicare entitlement programs last week.

"We are experiencing what seems likely to be the calm before the storm" when roughly 78 million baby boomers begin retiring next year, he said.

A major reform of entitlements in 1983 raised Social Security and Medicare payroll taxes, replenishing both programs' trust funds. But Congress has borrowed the money in the funds to finance other programs, replacing it with IOUs.

When the trust funds are exhausted — currently projected to occur in 2018 for Medicare and 2040 for Social Security — the government will have to cut benefits or pay them out of general revenues.

"The longer we wait, the more severe, the more draconian, the more difficult" the reform process will be, Bernanke said.