Up until now, both parties have been reluctant to target entitlement programs such as Social Security and Medicare for cuts. Recently, however, many new Republicans have begun to talk about reducing benefits for future or even current retirees.
The article explains just who is making these claims, and what they think should be done with these entitlement programs.
I’ll soon be facing the all-important task of completing our 1040 return. Just for fun, I ordered a paper copy of the instructions. It’s come to the point where it’s actually a book of 100 pages excluding a pile of forms almost as thick. I remember the time when J. K. Lasser was still alive and put out his annual publication to help people prepare their taxes. It wasn’t much more than an orange booklet then. At that time, the tax code was only a little over 100 pages long. It’s now a library of documents. Lasser died in 1984, but John Wiley & Sons bought his name for subsequent publications including one I authored at their request.
Our country is in unbelievable financial trouble now–and it continues to get worse as we delay taking the necessary bites out of Social Security, Medicare and Medicaid. Instead, we added 12 million more people to Medicare this last year and now all of us Medicare patients have the opportunity to get a free annual medical exam and pay less for drugs.
I’ve talked to lots of doctors while riding the ski lifts. Some small town doctors favor the increases in Medicare, but generally the larger city doctors dislike it, many saying that they are starting to reject Medicare patients because the compensation is too low, rules too tight and waiting times too long for the increasing number of elderly and the ever diminishing supply of doctors. One doctor said that Medicare now wants the doctors to report which of the specified cost-effective treatments they have used with some unannounced penalty for not using one on the prescribed list.
I pity the youth of our nation who will have to take the brunt of all of this. As it stands now, each already has over $50,000 share of the current national debt plus $300,000 share of the unfunded obligations for Social Security, Medicare and Medicaid. Since only about 55% of the poeple who turn in 1040′s actually pay any income tax (and many who don’t pay actually get cash instead), it’s likely that the remaining 45% will continue to vote for politicians who will further increase their benefits. It won’t be long until the non-payers are more than half of the voters as the Baby Boomers start to retire–most with insufficient funds. One study found that only 4% of middle income people nearing retirement will have enough money to sustain them through retirement. No wonder. The national savings rates have been a disgrace for over two decades as people consumed more and “invested” in houses they could not afford.
Our generation has lived in the best of times. I’m grateful for all of the opportunities available to us and our high standard of living. Nevertheless, we have consumed too much, and now someone has to pay the price. I seriously doubt if those who follow us will enjoy the same lifestyles for several generations. My most common response to people who ask me retirement questions are to exercise, eat wisely, spend less, save more and work longer. They’ll be very grateful later in life!
Bud
Chatanooga Times, January 13th, 2010
Q: I didn’t enroll in Medicare Part B back when my Part A started a few years ago. Can I enroll now?
A: Yes, but if you want to do it this year, you’ll
have to act soon. The general enrollment period for Medicare Part B
medical insurance began Jan. 1 and runs through March 31. Keep in mind
that although Part A is free, there will be a premium for your Part B.
And in most cases, that premium goes up each 12-month period you were
eligible for it and elected not to enroll.
To find out more about Medicare, visit the Medicare website at
www.medicare.gov or see Social Security’s online page of resources by
visiting www.socialsecurity.gov and selecting the “Medicare” link.
Q: I get both Social Security and supplemental security
income benefits. I recently was switched from a benefit based on my own
earnings to a higher widow’s benefit on my husband’s work record. But
then my SSI check was reduced. Why did you give me money with one hand
and take it away with the other?
A: SSI is a needs-based program. In other words, the
amount of your SSI is based, in part, on your income and resources. So
if your income goes up and your financial need decreases, your SSI
payment also will decline. When you started getting the higher widow’s
benefit from Social Security, your other income went up, so your SSI
payment had to go down. For more information, you can visit our Web page
about SSI at www.socialsecurity.gov/ssi. Or you can call Social
Security’s toll-free number at 1-800-772-1213 (TTY 1-800-325-0778) and
ask for the publication, “Supplemental Security Income.”
Social Security Optimization: Timing is everything with Social Security and with Medicare. Find out what strategy will get you the most return at NewRetirement.com
The Wall Street Journal, December 17th, 2010
This week’s landmark tax deal sharply changes the financial outlook
for Social Security. That has huge implications for your retirement. And
most people don’t have a clue what’s coming.
The deal, by cutting payroll taxes for one year, weakens Social
Security’s funding. It puts those payroll taxes “in play” as a political
football for the first time. And by freezing federal taxes at today’s
low rates, it will add at least $900 billion—and probably much more—to
our spiraling national debt. That threatens the ultimate financial
stability of the federal system.
Note that while Social Security is called a “trust fund,” that is
largely a matter of internal accounting. Your Social Security checks
ultimately come from the same flow of tax dollars as all other federal
spending. Social Security can’t stay solvent unless Uncle Sam does.
Ten years ago, the national debt was about $3.5 trillion. By 2020,
Congressional Budget Office calculations suggest it could be well over
$20 trillion. No kidding.
Social Security Optimization: Learning how best to take advantage of Social Security can be key to securing your retirement, permitting you to take full advantage of what money is owed to you. Find out more from NewRetirement.com
AP Newswire, November 30th, 2010
Divisions remain within President Barack Obama’s deficit commission
on politically explosive budget cuts and slashes in Social Security
benefits, even as the panel’s co-chairmen go public with a revised plan
to tame the runaway national debt.
The new plan by co-chairmen
Erskine Bowles and Alan Simpson, to be unveiled Wednesday, faces an
uphill slog. Resistance is certain, not only because of the idea of
raising the Social Security retirement age, but also because of proposed
cuts to Medicare, curtailment of tax breaks and a doubling of the
federal tax on a gallon of gasoline.
Though the plan appears
unlikely to win enough bipartisan support from the panel to be approved
for a vote in Congress this year or next, Bowles has already declared
victory, saying he and Simpson have at least succeeded in initiating an
“adult conversation” in the country about the pain it will take to cut
the deficit.
The plan faces opposition from many commission
members. House Republicans appear uniformly against tax increases, while
liberal Democrats like Jan Schakowsky of Illinois appear unlikely to be
able to accept big cuts in federal programs for seniors.
Obama
named the commission in hopes of bringing a deficit-fighting plan up for
a vote in Congress this year, but it appears to be falling well short
of the 14-vote bipartisan supermajority needed.
A new version of
the plan, obtained by The Associated Press on Tuesday, makes mostly
minor changes to a draft that whipped up enormous controversy when
unveiled earlier this month. Some domestic spending cuts are modestly
higher than previously proposed, and health care savings from
overhauling the medical malpractice system would reap less than proposed
earlier this month.
Unlike their original proposal, Bowles and
Simpson stop short of calling for caps on medical malpractice awards.
Instead they recommend changes in how awards are made.
But other
proposals remain the same. Among them are a gradual increase in the
Social Security retirement age to 68 by 2050 and 69 by 2075, using a
less generous cost-of-living adjustment for the programs and increasing
the cap on income subject to Social Security taxes.
The plan also
retains a 15-cent-a-gallon increase on gasoline, a three-year freeze on
federal worker pay and the elimination of 200,000 workers from the
federal payroll through attrition.
The proposal obtained by the AP was a draft that was still undergoing changes Tuesday evening.
Other recommendations:
— Eliminate congressional pet spending projects known as “earmarks.”
—
Reduce the corporate income tax rate to 28 percent from 35 percent and
stop taxing the overseas profits of U.S.-based multinational
corporations.
— Overhaul individual income taxes and corporate
taxes, giving Congress the choice of reducing the top rate to as low as
23 percent and no higher than 29 percent. The lower the rate, the fewer
the tax credits and deductions that would be available to taxpayers.
Under
one scenario proposed by Bowles and Simpson, taxpayers would face three
tax brackets of 12 percent, 21 percent and 28 percent. Taxpayers would
still be able to claim an earned income tax credit and child tax credit
as well as all standard deductions and exemptions. Capital gains and
dividends would be taxed at ordinary income tax rates. Taxpayers could
claim a mortgage interest deduction up to $500,000, but only on their
primary residence.
Social Security Optimization: Whatever happens to social security, it will never cease to be important to maximize your return from this all-important retirement program. Find out the best way to do that at NewRetirement.com
The Associated Press, November 11th, 2010
The leaders of the deficit commission are baldly calling out the
budget myths of both political parties, challenging lawmakers to engage
in the “adult conversation” they say they want.
Their plan —
mixing painful cuts to Social Security and Medicare with big tax
increases — has no chance of enactment as written, certainly not as a
whole. But the commission’s high profile will make it harder for
Republicans and Democrats to simply keep reciting their tax and spending
talking points without acknowledging the real sacrifices that progress
against government deficits would demand.
It’s time for both
conservatives and liberals to “put up or shut up,” says Jon Cowan, head
of the centrist-Democratic group Third Way, which praised the bold new
proposals and urged politicians to show courage. Republicans failed to
produce their often-promised deficit reductions when they controlled the
government, Cowan said, and Democrats refuse to acknowledge that
entitlement programs such as Social Security and Medicare must be
trimmed.
Already, some top elected officials — House Speaker Nancy
Pelosi, for one — have declared Wednesday’s proposals by President
Barack Obama’s bipartisan commission unacceptable. Others still say
deficits can be reduced in relatively easy ways, a notion that few
mainstream economists accept.
There’s no need to trim Social
Security, Sen. Jim DeMint, R-S.C., a tea party favorite, said Sunday on
NBC’s “Meet The Press.” ”If we can just cut the administrative waste,”
he said, “we can cut hundreds of billions of dollars a year at the
federal level.”
Well, no.
As amply demonstrated by the
panel’s co-chairmen — former Clinton White House chief of staff Erskine
Bowles and retired Sen. Alan Simpson, R-Wyo. — taming the deficit
requires real pain all around. One person’s government “waste” is
another’s essential program.
Read more of this article.
Social Security Optimization: Whatever is done to Social Security in the future, it is never a bad time to get the most out of the program. Learning how best to use the rules of Social Security to your advantage is key to maximizing your gains from this most important of government social programs.
The New York Times, November 4th, 2010
Is Social Security a pension plan?
No, but it was sold to the public in the 1930s as if it were one, and that matters.
Social Security is one of the issues that Congress will eventually have
to address, but it was almost absent from the campaign that just ended.
The conventional political wisdom is that serious changes to entitlement
programs can be made only on a bipartisan basis, in which each party
implicitly promises not to attack the other for the deal. For now, such a
spirit seems unlikely, to say the least.
And yet it was interesting that the National Bureau of Economic Research
chose the election week to release a new study on the impact of
previous changes in the system on Social Security benefits. The paper
concludes that a significant part of tax increases have not helped cure
projected deficits because they are used to pay additional benefits —
and that those added benefits go primarily to higher-income Americans.
If you look at Social Security as a pension plan, that result seems not
only fair, but required. If you contribute more to a normal pension
plan, you expect to get higher benefits. Why else would you contribute?
And Social Security taxes are often called contributions.
But the reality is that Social Security is not a normal pension plan,
even though it somewhat resembles one because the benefit level is
related to the recipient’s income while he or she was working. It is
what it was when it was created in the Great Depression: a plan to tax working Americans to pay for benefits given to retired and disabled workers, and to their families.
Over the years, the government has tried a couple of ways to increase
revenue for the Social Security system as the retirement of the baby
boom generation grew closer. One was to raise the payroll tax, which is
now 12.4 percent of the first $106,800 earned by an employee. (The total
tax is somewhat obscured because half of it is withheld from paychecks
and the other half is paid directly by the employer.)
Social Security Optimization: Whatever the status of Social Security, it is important to ensure that you get the most out of it. Using our calculators and articles, you can find out how to get the most out of your Social Security.
Savings.com, October 14th, 2010
Question: I’ve heard conflicting opinions about Social Security. Will it still be around when I’m ready to retire? I’m 32 years old.
Your doubts are certainly justified. Social Security will pay out more
this year than it gets in payroll taxes. You don’t need to be a
financial planner to understand that a negative cash flow–more money
going out than money coming in–is not sustainable forever! Also, for
only the second time in history, Social Security income will not get a
cost of living increase this year.
With that said, however, there has never been a
social program created by the federal government that has been
eliminated. Politicians may speak of long-term goals, but they truly aim
for short-term popularity–which is why large issues that affect
millions of people are only discussed, but nothing is done until there
is no choice but to act.
In summary, there is no doubt that Social Security will evolve into some
other form than it is now; however, it is unlikely that it will ever
completely go away.
How to Plan for an Uncertain Retirement Outlook
There are three inter-related reasons why you should not plan on receiving Social Security Benefits until age 70:
Social Security Optimization: To best use Social Security, be it now or in forty years, you must know the rules. Find out how to optimize your Social Security at NewRetirement.com
The Los Angeles Times, September 28th, 2010
The day after Jesse Kelly won the Republican primary in Arizona’s 8th Congressional District, Democratic incumbent Gabrielle Giffords went on the air with a lacerating attack.
Noting that Kelly said he ultimately wanted to eliminate Social
Security, Giffords’ television ad warned that Kelly “is a risk we can’t
afford.”
Kelly, a construction manager with no political experience, had made the
mistake of venturing into the mine-strewn politics of Social Security.
No matter that he said he would preserve benefits for current retirees.
The fact that he once described it as “the biggest pyramid scheme in
history” gave his rival the equivalent of cannon fodder in a district
where nearly one-fifth of the population is older than 65.
Kelly is now running his own ad vowing to “honor our commitment to seniors,” trying to fend off a line of assault that Democrats are stepping up throughout
the country. It’s one of the few consistent themes in Democratic
campaign commercials in a year when the party has otherwise eschewed a
national message.
Accusing Republicans of wanting to do away with Social Security is a well-worn trope for Democrats. But a slew of “tea party”-backed
candidates who have called for privatizing or eliminating the program
have given Democrats fresh ammunition at a time when they are on the
defensive about healthcare reform and the economic stimulus.
The strategy allows Democrats to link their rivals to former President George W. Bush, who sought to allow younger workers to invest a portion of their Social Security taxes in the stock market.
“And because it has also become a rallying cry among some of the tea
party movement … it’s an indicator of how far to the right and how
extreme a position the Republican candidates are taking,” said Rep.
Chris Van Hollen of Maryland, chairman of the Democratic Congressional
Campaign Committee, which has devoted the majority of its spots to
slamming House GOP candidates on the topic.
Read more of this article.
Social Security Optimization: How do you ensure you get what you’re owed from Social Security? Make sure you’re taking full advantage of the full rules of the program. Learn how to optimize your Social Security at NewRetirement.com
The Fiscal Times, June 2nd, 2010
For the first time since 1975, Social Security beneficiaries received no
cost-of-living adjustment (COLA) this year because prices fell in 2009.
President Obama tried to offset the loss by proposing a special $250
check in lieu of a COLA, which would have cost more than $13 billion .
But the Senate rejected that measure by a vote of 50-47.
Now, there may be more disappointing news for 43 million seniors: This year’s low inflation may mean no COLA increase in 2011.
The
final piece of the puzzle in determining the size of any 2011 COLA, the
September consumer price index, will be released a little more than two
weeks before the midterm elections on Nov. 2. While public concern
about the size of the $1.4 trillion federal budget deficit has risen
sharply in recent months, the temptation for politicians to garner favor
with seniors surely will be there — a temptation that Obama and
Congress should resist.
Unintended Consequences
The
COLA is based on the percentage change in consumer prices from the
third quarter of one year to the same quarter the following year.
Because of a big increase in energy prices from 2007 to 2008, the Social
Security COLA was a whopping 5.8 percent in January 2009. With energy
prices later falling and the onset of recession, the price index
declined 2.1 percent between the third quarters of 2008 and 2009. Hence,
no COLA for 2010. Social Security benefits were indexed for inflation
beginning in the 1970s precisely to stop politicians from repeatedly
increasing them on an ad hoc basis. It’s also worth mentioning that
adding a few dollars to a monthly Social Security check isn’t a good way
to boost the economy. There are better ways to implement more economic
stimulus if necessary, as many believe it is. Moreover, it’s far from
clear that a modest COLA would be of much help to seniors.
Consumer prices are
increasing this year, but according to most forecasts, not by enough to
trigger a COLA. In fact, the Obama administration’s fiscal 2011 budget
released in February assumed there would be no COLA next year. With several more months of price data available, that’s still looking like a good bet.
One
benefit for the 31 million qualifying seniors — they don’t have to pay
the $169 annual Medicare Part B increase because there was no COLA. It’s
not as good as a $250 check but at least it’s not taxable.
Read more of this article.
Social Security Optimization: With no Cost of Living Adjustment for the next year, it is vital that you get the most out of your social security. Consider how best to optimize Social Security at NewRetirement.com
