Showing posts with label proposed changes to Social Security. Show all posts
Showing posts with label proposed changes to Social Security. Show all posts

Wednesday, January 4, 2017

Proposed Changes to Social Security

Nearly every adult American knows the Social Security Administration will face a financial shortfall when the trust fund runs out of cash in 2034. If nothing is done, both current and future retirees will face benefit cuts of approximately 21 percent.  In order to keep this safety net at full strength, changes have to be made.  The good news is that Social Security is in no danger of going completely bankrupt.  As long as there are people in the workforce, the government will receive payroll taxes which are large enough to cover approximately 80 percent of what they are obligated to pay.  What the government is trying to find, however, is a way to make up for that 20 percent shortfall.

If you are curious about the proposed changes to Social Security which are under consideration by the new, Republican-controlled Congress, there is a list of the proposals below.  According to a series of articles posted on the Fox News website, including one titled "7 Ways the GOP's Proposed Social Security Changes Could Impact Your Pocketbook," a number of ideas are under discussion.  Some of these proposed changes will affect current retirees; others will have a larger effect on people who will reach retirement age in the next decade or two.  Some of the proposals will receive wide support; others will be more controversial.

It is important to remember that the proposals listed below are just that ... proposals.  The final bill may differ from what is being considered, particularly if citizens become upset by any of these proposals and contact their individual U.S. Representatives and Senators to complain.  Whether you support or object to the ideas under consideration, now is the time to let Congress know your opinion.

Proposed Changes to Social Security

1.  First, no new revenues are currently under consideration.  The proposals which have been put forth so far do not include any increase in Social Security withholding; nor do they include an increase in the amount of wages which are subject to Social Security withholding.

2.  Between 2023 and 2030, the full retirement age (which will be 67 in 2022) would gradually increase to age 69.

3.  Beginning in 2023, the way Social Security benefits are calculated would change slightly.  Low-income beneficiaries and people who have worked over 35 years would receive a small increase; those who have above-average incomes would see their benefits decrease slightly.

4.  Beginning in December, 2018, cost-of-living increases would be lower because a different consumer price index would be used.  Instead of the the current CPI-W index, a chained CPI would be used.  The difference is that a chained CPI assumes that inflation causes people to make substitutions when they cannot afford their current expenses.  This means they might move to a less expensive home, buy more affordable cars, or switch from name-brand to generic products.  As a result, according to the chain-weighted CPI, the "real" inflation most people experience is not as large as the actual rate of inflation.  The AARP has long opposed this change, arguing that many seniors already have cut out as much as they can and a chain-weighted CPI could cause even more seniors to eventually end up in poverty.

5.  Some retirees would receive no cost-of-living increases at all after they retire.  Those affected would be single retirees with an adjusted gross income of over $85,000 or joint tax filers with an adjusted gross income over 170,000.

6.  Beginning in January, 2019, there would no longer be an earnings limit on people who begin to collect their Social Security benefits early. Those who continue working while they collect reduced benefits between the age of 62 and their full retirement age could earn as much as they want. 

7.  Between 2045 and 2054, federal income taxes on Social Security benefits would gradually be eliminated.  Currently, up to 85 percent of your benefits are subject to federal income taxes, depending on how much additional income you have.  After this change, only your additional income would be taxable.  However, this proposal would not go into effect for nearly 30 years.

8.  People who delay collecting their Social Security benefits past their full retirement age currently receive an increase in benefits of 8 percent for every year they postpone collecting.  One proposal being considered would allow people to choose a lump sum payment, instead, if they delay receiving their Social Security.

9.  Currently, a non-working spouse can receive a monthly benefit that is up to 50 percent of what the working spouse receives after retirement.  Under the new proposals, there would be a cap on what a non-working spouse could receive, so some spouses would no longer receive half of what the higher wage earner receives.  This cap is more likely to affect high-income couples.

We can expect there will be disagreements on whether or not these are the best ideas for fixing Social Security. However, what is not in dispute is that some changes are necessary and, no matter what Congress does, most people will be impacted in some way by the changes.  If you want to have a voice in what changes are made, be sure to contact your U.S. Representative or Senator.  Ask what changes they support and why they believe those are the best choices.  Then, be sure to let them know if you agree or disagree with each proposal.

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Tuesday, November 24, 2015

How Americans are Aging and Changing

The Baby Boomer generation is getting older and lifespans in general are increasing.  As a result  the United States is aging rapidly.  Recently, I attended "The State of Aging in Orange County," a seminar put on by the Office on Aging and other agencies in Orange County, California.  The speakers were outstanding and over the next few weeks this blog will contain posts on some of the information that was covered during the seminar.

In particular, most Baby Boomers will be interested in some of the general facts that were brought up by the speakers.

Redefining What it Means to be Old

Karen Roper, who is Director of OC Community Services and oversees the Office on Aging, the Veterans Service Bureau and several other agencies, said they are working to redefine what it means to be old.  Rather than basing it on someone's age, they want to define it based on a person's functional ability.  After all, she pointed out, some people can be in their 80's or 90's and still be able to live on their own and take care of their shopping, housework, cooking, etc.  On the other hand, a person who is in their 50's or 60's might be suffering from a number of medical conditions, including early onset dementia, which might make it difficult for them function independently at all.  Which person should be considered "old?"

The U.S. Population is Aging Rapidly

Michael Schrader, the Chief Executive Officer of CalOptima, presented fascinating statistics regarding how quickly the American population is aging.  In 2015, there are approximately 40 million people over the age of 65.  Over the next ten years, by 2025, the population of people over the age of 65 will increase by 50% to 60 million.

Social Security and Medicare Will Need to be Reformed

Mr. Schrader revealed that over that same ten year period, Social Security costs are expected to increase by 77% and Medicare costs by 89%.  This is unsustainable without some types of reforms. As was recently mentioned in this blog, one change has already been made in order to save the government money in Social Security expenditures. It was part of the 2015 budget agreement.  The SSA has now eliminated an option couples used to have for maximizing their benefits ... the file and suspend option. 

Among other changes that are being considered are:

* Raise the minimum ages to receive both Social Security and Medicare benefits
* Increase the co-pays and other forms of cost sharing for Medicare beneficiaries
* Change to a need based voucher system for Medicare benefits

New Approaches to Administering Medicare and Medicaid

CalOptima is also experimenting with a new system to make Medicare benefits more efficient, cost effective and easier to use for beneficiaries who qualify for both Medicare and Medicaid (known as Medi-Cal in California).  Many of the people who qualify for both have to deal with four different programs ... Medicare Part A, Medicare part B, Medicare part D, and Medicaid.  Since these people frequently have dementia or other health issues, dealing with all these different  programs is overwhelming.  CalOptima is experimenting with combining all four of those programs into one, adding on dental and vision services, and providing case carriers to assist the recipients.  They believe that reducing the fragmentation will make the program operate more efficiently and less expensively.  In addition, beneficiaries will only have one phone number to call and one person to deal with, which should make things more manageable.

If the CalOptima program works here in Orange County, it will be spread to other parts of the United States.

In the coming weeks, this blog will contain additional information that was provided during the State of Aging seminar ... interspersed with other topics of interest to Baby Boomers.

If you are looking for additional information on retirement planning, coping with health issues, finding good places to retire, changing family relationships or more, use the tabs or pull down menu at the top of this article to find links to hundreds of additional helpful articles on a variety of subjects.

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