Tag Archive for 'Social Security'

2010 Social Security COLA Stable, but $250 Might be in Your Mailbox

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Social Security beneficiaries will not receive a Cost of Living Increase next year for the first time in over thirty years, causing President Obama to seriously consider sending senior beneficiaries another round of $250.  The Cost of Living Adjustment- or COLA- is not increasing because it is linked with falling consumer prices tied to inflation, which is negative this year due to falling energy prices.  The $250 payments  would most likely be sent to 57 million seniors and would account for around a 2 percent increase for the average Social Security recipient, which would cost the government between 13 and 14 billion dollars.  How this money could be financed is up to Congress to decide.  Aside from a possible $250 check from the government, check out other ways to optimize your social security.

Apply for Social Security Benefits Online

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Great news for those of you who don’t want to wait in line at the Social Security office.  If you are at least 61 years and 9 months old and want your benefits to start no more than four months in the future then you can apply for social security benefits online here at social security online.  Furthermore, the site has an interesting “Retirement Estimator” that will prepare a personal estimate of your benefits depending on different starting ages.  

On Being Conservative

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I grew up in the Great Depression and witnessed my parents’ penchant for avoiding risk. I learned my own lessons as well after I started earning my own money and tried to save it. Someone advised me of a “good” stock broker. He wasn’t good to me. I lost money on every stock he sold to me. I think that his firm directed him to sell the stocks in their own inventory that they considered bad investments.Midway through my working career at Boeing, I became head of corporate planning—a job that required parceling out research and new business budgets to the operating divisions and justifying the investments on the the sales prospects to the company’s board of directors. The total of the budget requests were always higher than we could afford to support while the sales projections from the operating divisions were, when totaled, higher than the customers could afford to spend. They reminded me of the always optimistic projections of my first stock broker.Years later, in retirement, I learned a lot about the various retirement planning methods. Almost all of them used optimistic portfolio returns from history and left out many things that influenced retirement spending and income, and no two gave similar answers. Inserting my standard test values for investment returns, pension, Social Security, tax rates, etc., I found they all gave different results. In fact, some said that no additional savings were required while others would impose staggeringly high monthly savings. These results were published in two, full page, articles in The Wall Street Journal.These programs came from well-known financial firms which seemed reluctant to improve their programs. I still find significant shortcomings after all of these years. The majority do not account for the appreciable costs that bring actual returns to values lower than the indexes for returns, nor do the simpler programs account for reverse dollar-cost-averaging shown by my research and described in J. K. Lasser’s Your Winning Retirement Plan.There are more complex statistical programs that purport to predict the future. They don’t. They should really say they are poor representations of what might have happened in the past. Most are based on fake return statistics and don’t correlate with actual historical inflation at the time of the returns.Together with my wife, we offer modest assistance to some people relying only on Social Security. They consumed their savings too early for various reasons, and now are sorry that they weren’t more conservative in their planning, budgeting, investing and spending. Over the years inflation destroyed the value of the pensions some have. Even then, they didn’t realize that they can’t spend all of their fixed pensions in retirement. It’s necessary to save part of each pension payment so they’ll be able to supplement their income later as inflation destroys fixed pensions income.Then there are Unk-Unks, a term for unknown-unknowns, that is, things you are unlikely to think about in advance, such as household emergencies and events in the lives of your adult children or elderly parents. Retirees have told me their biggest Unk-Unks were the divorce of a daughter with children followed by the need to support elderly parents after the parents exhausted their own savings.There are the things that you could have planned using some very detailed planning. Such planning is used by estimators in the construction industry. When an item was forgotten, we called these OSIFs, short for “Oh, shoot, I forgot,” except we had a stronger word than “shoot.” Forgotten items result in a dollar-for-dollar loss. On www.analyzenow.com I include a special event worksheet in the comprehensive programs that encourages people to include the cost of high value items such as to replace a roof, automobiles, etc. Retirees (and older working people) can gain much by first saving for a future purchase rather than paying for it over time.During my working years, I was very successful managing projects and organizations ultimately becoming president of The Boeing Aerospace Company (1980-1985). I attribute much of my success to being conservative both in work and retirement. Being conservative in retirement planning means using inputs that are low for returns, high for taxes, long life spans, etc. It also means having a significant portion of your assets in conservative securities. You can’t afford to retire on lottery tickets in a retirement portfolio.Bud Hebeler, www.analyzenow.com

Addendum to A Generational Battle

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And now to add to yesterday’s blog, as a recent businesswire article, “Americans Dramatically Underestimate Health Care Costs in Retirement, First Command Reports” states that retirees need to show some foresight and put extra money for the rising costs of healthcare and clear deficit in Medicare and Social Security spending.  So ensure you and your financial advisor discuss and plan on having enough money for rising healthcare expenses and the rising taxes required to fund the government stimulus packages.  

A Generational Battle Awaits

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The baby boomers and their kids are involved in serious debate over Social Security, Medicare and their respective futures.  The Social Security program is clearly running out of money, according to the Social Security Trustees report, if we do nothing, negative cash flow will commence in 2017, and all the money will be gone by 2040.  At this point in time, the boomers and their children are both supplying social security but come 2011, there will begin to be a turnaround as more and more boomers, eventually 76 million come 2029, become benefactors of the program. 

  Add to this problem the fact that life expectancy at birth is about 76 years old and life expectancy at 65 is now 17 years and there is something economically uneasy about the situation. As boomers are living longer, their medical expenses are increasing, so where are all the workers to cover these increasing costs? Well we don’t have enough workers to cover these expenses, so serious debate, as is happening now, must take place as to the next steps.  Someone, or rather a particular demographic, is going to have to cover the cost, so what is the best way to settle this without causing a generational debate. It seems boomers’ children are going to have to carry the weight of their parents but as Garver states in his article “Social Security Sets the Stage for Generational Warfare,” “Because boomers’ kids neither created the Social Security problem not let it fester more than 40 years, the problem is potentially one of generational warfare.  And boomers’ kids would hold the moral high ground by reminding their boomer parents about being taught to take responsibility for one’s own mistakes.

  There are many plans in the works about ensuring the future of Social Security and Medicare, and in a recent New York Times article, “A Basis is Seen for Some Health Plan Fears Among the Elderly” the boomers have some reason to fear about the future of Medicare as they have known it under the Obama administration.  In a Kaiser Family Foundation poll this month, only 23 percent of respondents over the age of 65 felt they would be better off if health reform passed. Younger respondents were more optimistic To many boomers Obama’s cutting of healthcare costs, and combined emphasis on effectiveness of certain programs has lead them to see that he wants to curb some of Medicare’s services.  Many are even going so far as to say that Obama is implementing so called “death squads” that will decide people’s medical fates in the last parts of their lives.  While these death squads are one extreme viewpoint and takeaway from a lengthy and constantly expanding (1,017 pages) reform bill, it still reflects as one Gallup poll released last month shows that by a 3-to-1 margin, seniors believe that reform will reduce their access to healthcare.  But as one article in the “Christian Science Monitor” points out “Why GOP sees Seniors as Crucial to Health Reform Battle” seniors are the ones with the time to attend town meetings, and they pay close attention to the details of their benefits. 

  Its going to be interesting to see if we will be able to find a common ground, where maybe if you are a senior who has enough money for private insurance you can wave benefits knowing that you will be benefiting from your children’s hard work.  As it seems right now, both sides are taking the extremes of the debate, but hopefully we find a middle ground because if we don’t it’s surely going to be an uphill battle.

Who Should Fund The Boomer’s Retirement?

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So, my Mom met with her accountant last week. She is getting a life insurance policy to cover her business partner’s expenses if something were to happen. Her accountant suggested putting a Long Term Care Insurance rider on the life insurance policy.

Great idea, right?

Yes, the Long Term Care rider might be a great idea. The costs of Long Term Care are an expense that most retirees have not planned for and not having long term care insurance can completely devastate your finances. Please review information on the need for long term care insurance here

http://www.newretirement.com/Planning101/Serious_Medical_Crisis.aspx .

But, here comes the shocking part of the recommendation: The accountant suggested that that my mother ask my brother and I (her children) to fund the monthly premium on the rider since we would end up paying for Long Term Care expenses if she hadn’t taken care of them herself.

Indeed, Long Term Care insurance payments are likely less expensive than the ultimate cost of Long Term Care, but why should we, her children, pay for either. We would of course fund her needs — or make arrangements for her to move in with us — if necessary, but why is the general population and a financial expert recommending that it is indeed our responsibility to fund these things?

Social Security, Medicare, Long Term Care Insurance and More — Who Should Pay for It All? Boomers? Children of Boomers? Grandchildren of Boomers?

We children of boomers are already going to have to fund Social Security and Medicare. The baby boomers are retiring with these programs being unfunded. We will be paying our taxes to fund our parents (and grandparents) retirement.

What’s worse, the under- or un-funding of these programs is not even factored into the known and mounting deficit that we are inheriting.

We children of Boomers have an incredible financial burden to bear.

Retiring Boomers Should Consider Who Should Fund These Costs

Please boomers and those advising boomers, please think about the sanity of putting these costs on your children and grandchildren. Is this what you want your legacy to be?

Retirement should be earned. Barring severe health issues, there is no logical reason to retire before you have saved enough money to cover your costs.

Senate Moves to Add Senior Benefits to Economic Stimulus Package! Senior Outrage Gets Results

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Seniors have successfully expressed their outrage at being excluded from benefiting from the Economic Stimulus package proposed by the House.

Congratulations! Congratulations?

Senate Democrats announced today that they will add $150 billion in rebates for senior citizens living off Social Security. This move will likely cause a clash with the White House and House leaders who sponsored the narrower package that excluded seniors from receiving funds in the stimulus package.

Whether or not the plan will save the economy from a recession is still in question. However, including seniors in the stimulus plan insures that financial help could be delivered to those most arguably in need — our nations retired who live on a fixed income.

Although, adding senior benefits would likely mean shrinking the size of payments to those earmarked earlier.

  • Who do you think most “deserves” stimulus package benefits?
  • Will the stimulus package save economy from recession?
  • Does anyone actually need these benefits?
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