Wake up people...

Financial problems in the U.S. stemming from the aging baby boomer generation are only going to get worse, says NPR in its Family Matters series, and government entitlement programs won’t be able to sustainably provide care for the growing senior population.

Roughly 78 million boomers (a staggering number) are entering their retirement years, and while they’re “young” seniors now, their health likely won’t last—and neither will their resources.

For individuals, families, local government officials and federal taxpayers, this demographic shift will drain dollars and attention, and force extremely difficult decisions about living arrangements, as well as end-of-life care.
The government is running short of funds for existing programs. Medicare’s trustees recently said the program that provides medical care to the elderly will remain solvent only until 2024. The Social Security system already is paying out more than it is taking in.

More than 50 million Americans reside in multigenerational homes. And in many of these households, middle-aged “children” are caring for elderly parents, as well as providing shelter for their own grown children. In many cases, family members are making big financial sacrifices to help each other.
But the squeeze may get even tighter for future households because boomers generally had fewer children, and more divorces, compared with the World War II generation. A Pew Research Center analysis of census data found that the boomer generation “offers its elderly parents about 50 percent more grown children with whom they can share a household.”

Providing aging Americans with long-term care “is a bona fide need and growing concern,” said David Walker, a former U.S. comptroller general and an expert on federal spending. “But we have to recognize that the U.S. government has overpromised in the area of health care. We can’t make more entitlement promises.”

About 20% of older people are now living with another generation, according to the Pew Research Center, and that number is expected to keep rising. But doubling up to save on living costs “may fall far short of the trillions of dollars that would be needed to hire all of the care needed to cope with all of the long-lived elderly,” NPR says.

Think you have retirement healthcare cost covered? Think again.

A 65-year-old couple retiring in 2012 is estimated to need $240,000 to cover medical expenses throughout retirement, according to the latest retiree health care costs estimate calculated by Fidelity Investments. This represents a 4% increase from last year, when the estimate was $230,000.

For many Americans, health care likely will be among their largest expenses in retirement. The estimate, calculated by Fidelity's benefits consulting business, does not include any costs associated with nursing-home care and applies to retirees with traditional Medicare insurance coverage.

The estimate has increased an average of 6% annually since Fidelity's initial calculation of $160,000 in 2002, with the exception of 2011 when the estimate declined $20,000. That one and only decrease in the history of the estimate was due to a one-time adjustment driven by Medicare changes that reduced out-of-pocket expenses for prescription drugs for many seniors. This year, health care expenses are rising once again.

"Today's workers must understand that the cost of health care is expected to continue rising significantly in future years," says Brad Kimler, executive vice president of Fidelity's Benefits Consulting business.

"Medical inflation is outpacing salary increases and cost of living adjustments for many people. Until that situation changes, it is critical that individuals include health care costs in their retirement savings strategies today so they can be prepared to pay their medical bills throughout retirement," Kimler says.

Fidelity compared Social Security's average cost of living adjustment (2.3% against an assumed average annual increase of health care costs for retirees nationally (6%). The comparison found that 65-year-old couples retiring this year with a $75,000 household income should expect that 35% of their annual benefit (about $10,476) could be needed for health care expenses today. In 15 years or by 2027, their allocation of Social Security benefits going to health care expenses is likely to almost double to 61% of a $41,205 annual Social Security payment, or about $25,000 a year.

"Retirees relying entirely on Social Security to fund their health care costs will be faced with difficult challenges in the future," says Kimler. "Today's workers should plan to supplement their retirement income to cover their medical expenses. It is never too late to begin utilizing all retirement savings vehicles available, including any 401(k) accounts, IRAs and health savings accounts, to help build a more secure retirement."

The student loan debt impacts Boomers and beyond...

The Washington Post reports some interesting data regarding student loans and seniors. The article reports that new research from the Federal Reserve Bank of New York shows that Americans 60 and older still owe about $36 billion in student loans, providing a rare window into the dynamics of student debt. More than 10 percent of those loans are delinquent. As a result, consumer advocates say, it is not uncommon for Social Security checks to be garnished or for debt collectors to harass borrowers in their 80s over student loans that are decades old.

That even seniors remain saddled with student loans highlights what a growing chorus of lawmakers, economists and financial experts say has become a central conflict in the nation’s higher education system: The long-touted benefits of a college degree are being diluted by rising tuition rates and the longevity of debt.
Some of these older Americans are still grappling with their first wave of student loans, while others took on new debt when they returned to school later in life in hopes of becoming more competitive in the labor force. Many have co-signed for loans with their children or grandchildren to help them afford ballooning tuition.

Read full article...

Working and Social Security

The rules are straightforward and spelled out clearly on Social Security's website, but here's the short course:

If you are between 62 and 66, Social Security will deduct $1 from your benefit payments for every $2 you earn above the annual limit, which in 2011 is $14,160.
The year you turn 66, the cap is higher. In 2011, you can earn a total of $37,680 with Social Security deducting $1 for every $3 you earn above that.

Pay attention to the rules because payback can be tough. If you work and collect simultaneously, Social Security will continue to pay you while you work, then after you've filed your income taxes in April of the next year, it will send you a letter saying you made too much money and it is taking back what it overpaid based on the earnings limit.

People who have had this retirement planning scenario happen to them warn that this can put you in a real bind if you spent the money you earned as well as the money you simultaneously collected from Social Security. Both you and your spouse -- if that person is getting benefits based on yours -- could go for several months without getting a Social Security check.

Does it make sense to take a job if you're younger than full retirement age and already taking Social Security? Yes, because if Social Security suspends your benefit, it will recalculate it as if you hadn't claimed. So when you quit work or reach full retirement age, you'll get a payment that reflects the age at which you're currently claiming (minus the time for which you already received benefits) -- and that can raise your payment substantially.

Social Security Launches New Spanish Online Services

Michael J. Astrue, Commissioner of Social Security, announced that the agency’s most popular online services, the applications for retirement and Medicare and for Extra Help with Medicare prescription drug costs, are now available in Spanish. The new online services are available at www.segurosocial.gov, the robust Spanish version of Social Security’s award winning website,www.socialsecurity.gov.

“The Spanish online applications for retirement, Medicare, and Extra Help with Medicare prescription drug costs are so easy and can be completed in as little as 15 minutes,” said Commissioner Astrue. “I’m proud that Social Security is a leader in the Federal government in providing service in Spanish, and I thank Don Francisco for volunteering his time to help spread the word about these new online services.”

In addition to the new applications, Social Security has also recently made online estimates of retirement benefits available in Spanish. People interested in planning for retirement can get an immediate, personalized estimate of their Social Security benefit by using the Retirement Estimator at www.segurosocial.gov/calculador. Using people’s actual wages from their Social Security record, the Estimator gives a good idea of what to expect in retirement. Workers can enter in different dates and future wage projections to get estimates for different retirement scenarios, which is why this service is one of the most highly rated electronic services in the public or private sector.

Don Francisco, who will appear in several new public service announcements for Social Security, said, “I have good news to share with the millions of Americans who prefer to conduct business in Spanish. You can now apply online for Social Security retirement and Medicare benefits in Spanish, as well as take advantage of other online services offered in Spanish at www.segurosocial.gov. ¡Es tan fácil!”

Once people complete the online application and “sign” it with the click of a mouse, the application is complete and, in most cases, there are no documents to submit or additional paperwork to fill out. It’s the easiest way to apply, and now it’s available in Spanish.

Best US Cities for Oldsters

Minneapolis is the best city in the United States for senior living, with Boston, Pittsburgh, Cleveland and Denver rounding out the top five, according to a new survey conducted for the Bankers Life and Casualty Company Center For a Secure RetirementSM.

Criteria in the areas of senior issues and gerontology identified the qualities for optimal senior living. Major categories were: healthcare, economy, health and longevity, social, environment, spiritual life, housing, transportation and crime. Each category was statistically weighted to reflect the needs of the senior population.

“Most surprising is that the survey results contain many cities we don’t often associate with senior living,” said Scott Perry, president of Bankers Life and Casualty Company, the national life and health insurer. “We weren’t interested in another study on where to enjoy your retirement, but instead wanted to find cities that did the best job in providing the services and support that seniors need. The top ranked cities aren’t what come to mind when you think about where to spend your golden years, but they scored high in the criteria most important to the 65 and up bracket.”

The Categories

The Healthcare category includes physicians per capita, gerontologist to senior ratio, hospitals per capita, hospitals with special care, nursing homes per capita, nursing home beds per capita, continuing care retirement communities per capita and average nursing home rating.

Economy includes consumer price index, sales tax rate, the unemployment rate and the stability index.

Health and Longevity includes life expectancy, age 85 expectancy, depression rate, heart mortality and cancer mortality.

Social includes percentage of seniors, social and emotional support, satisfaction with life rating, art and museums, education level, recreation, four-year colleges and libraries.

Environment includes number of sunny days, clean air levels, clean water measurement, natural disaster risk index, ocean coastline miles, river and lake square mileage, and local/state park number and size.

Spiritual Life includes percent of population belonging to organized religions and the number of religious congregations.

Housing includes cost of living index, housing price, property taxes and apartment rentals.

Transportation includes public transportation, special access and mass transit percentage.

Crime includes violent crime rate and property crime rate.

Methodology

The Bankers Life and Casualty Company Center for a Secure Retirement Best Cities for Seniors 2011 was conducted in July of 2011 by the independent survey administrator Sperling’s Best Places and identified the top 50 metro areas in the U.S. The complete report may be viewed at www.CenterForASecureRetirement.com.

Finally, a raise in social security.

Social Security retirement benefits for nearly 55 million people will rise 3.6% in 2012, the first cost of living increase since 2009 said the U.S. Social Security Administration on Wednesday.

Some other changes that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $110,100 from $106,800. Of the estimated 161 million workers who will pay Social Security taxes in 2012, about 10 million will pay higher taxes as a result of the increase in the taxable maximum.

“Over the past two years, costs for food, utilities and health care have continued to increase while Social Security benefits have not,” said Nancy LeaMond, AARP Executive Vice President. “This first increase in three years will provide much-needed relief to millions, and underscores the importance of Social Security as the only guaranteed, lifelong, and inflation-adjusted source of retirement income for most Americans.”

Monthly Social Security payments average $1,082, or about $13,000 a year. A 3.5 percent increase would amount to an additional $38 a month, or about $455 a year.

Most retirees rely on Social Security for a majority of their income, according to the Social Security Administration. Many rely on it for more than 90 percent of their income.

One man's opinion about the future of Medicare

The following Op-Ed appears in the June 29, 2011 New York Times, Opinion Section

The “roar” and “popular political crusade” that Frederick R. Lynch calls for in “How AARP Can Get Its Groove Back” (Op-Ed, June 24) appear to be only a slightly veiled call on the elderly to resist any and all significant cuts to Social Security and Medicare.

That might be possible with Social Security, but policy analysts have for years shown that a sustainable financial future for Medicare will require a sharp cut in benefits, and no less necessary for deficit reduction.

That need will of necessity be painful, but need not be disastrous: more money has never guaranteed good health care.

Moreover, a continued rise in Medicare costs will have to be paid for by the children of the beneficiaries.

As someone who has reached the age of 80, I would hope that if there is any wisdom at all among my peer group, it will be to recognize that our duty is more to those coming after us than to ourselves. We have made it to old age, and if AARP can bring about a sober dialogue between the young and us about how best to allocate resources fairly while saving Medicare, that would not be a roar, but common civic sense.

DANIEL CALLAHAN
Garrison, N.Y., June 24, 2011

The writer is president emeritus of the Hastings Center and the author of “Setting Limits: Medical Goals in an Aging Society.”

"Mr. Callahan offers a sound and common sense approach sans the usual scare tactics." Patricia Grace

Money, still the number 1 retirement concern

A new Gallup poll shows that two-thirds of Americans worry they will not have enough money for retirement, making it their top concern out of eight possible financial items. This represents a 13% increase in a 10-year period.

In 2001, Americans’ top three concerns were related to retirement security, having enough funds in the event of a medical crisis, and maintaining their standard of living, and Gallup indicates these issues have remained top concerns, with increased amounts of worry.

A closer look into the 66% of all Americans concerned about their future shows a staggering 77% of Americans in the 30-49 age range who consider themselves moderately or very worried about retirement—the most of any age bracket.

Many of those in that same age group also believe Medicare and Social Security are in a crisis, and Gallup says 74% of nonretiree investors plan to rely more on an IRA, 401(k), or other retirement savings than on Social Security.

The poll shows that worry about maintaining an an enjoyable standard of living has reached a new high at 58% of all Americans, up from 43% in 2001. Concerns over medical costs have been high since the 2008 recession, with 60% of those polled expressing worry.

Choosing the right time to collect Social Security can boost your income

The following is an excerpt of an excellent article written by Mary Beth Franklin, Senior Editor, Kiplinger's Personal Finance

Not so long ago, some people planning for retirement wrote off Social Security as an endangered benefit and a marginal addition to their post-career income. But in an era of disappearing pensions and erratic stock-market returns, the idea of guaranteed income for life that keeps pace with inflation holds fresh appeal. Increasingly, near-retirees are becoming aware of the value of working longer and waiting to collect Social Security benefits until the benefits are worth more.
But there are also a few clever -- and perfectly legal -- ways to time the collection of your retirement benefits to increase monthly checks for you, your spouse and any minor dependents. Play your cards right and you could increase your household income by thousands of dollars a year now, plus ensure larger benefits later.

The Basics

Although you can collect Social Security benefits as early as age 62, you may not want to. Your retirement benefits will be reduced by 25% or more for the rest of your life. And if you continue to work, your benefits could be further reduced -- even wiped out completely -- if you earn more than the prescribed limit.

In 2011, you lose $1 in benefits for every $2 you earn over $14,160. A more generous earnings cap applies in the year you reach your normal retirement age: You lose $1 in benefits for every $3 you earn over $3,140 per month during the months leading up to your 66th birthday. Once you reach your normal retirement age, the earnings cap disappears. Other types of income, such as pensions, interest and dividends, do not reduce your Social Security benefits.

Of course, for some people, waiting to collect Social Security is not an option. If you need the money, or you are in poor health and fear that you may not live long enough to collect benefits at your full retirement age, you should collect your Social benefits as soon as you are eligible at age 62. That assumes you are no longer working or, if you are, your earnings don't exceed the annual earnings limit by much.

But if you're able, it pays to wait. After you reach your normal retirement age, you can increase your benefits by an additional eight percentage points for each year you delay collecting, up to age 70, creating a larger base for future cost-of-living adjustments and a bigger benefit for a surviving spouse.

No More Do-Over

In the past, retirees who collected benefits early and regretted the decision later could repay all the benefits they had received and restart their benefits at a much higher level based on their current age. But that is no longer an option. In December, the Social Security Administration revised its do-over rule. From now on, you can only suspend benefits once during your lifetime, and it must be within 12 months of your initial claim. You will no longer be able to repay past benefits, but once you resume collecting retirement benefits, Social Security will recalculate the amount to take into account the months or years you suspended them, resulting in a larger payment than your initial amount.

Combo Approach

For some married couples, a combination strategy may make sense. The lower-earning spouse (usually the wife) could collect Social Security benefits early, and the higher-earning spouse could delay claiming benefits for as long as possible, up to age 70. Although the wife's retirement benefits will be permanently reduced, collecting benefits early will have no impact on her survivor benefits as long as she is at least normal retirement age when she begins collecting survivor benefits. If her husband dies first, she will be entitled to 100% of the monthly amount he received during his lifetime -- with no reduction in benefits. Of course, her own retirement benefit would disappear at that point. Read on to discover a few more creative strategies.

File and Suspend

Sometimes, the spouse who has little or no work history (again, often the wife) may be eager to collect spousal benefits -- worth up to half of what the main breadwinner receives. Normally, the wife must wait for her husband to file for his Social Security benefits before she can collect her share. But there's a way for her to collect spousal benefits while her husband's retirement benefit continues to grow.

As long as he waits until he reaches his normal retirement age, the husband can exercise a strategy known as file and suspend. That means he can file for his benefits, entitling his wife to receive spousal benefits immediately; then he can suspend his own benefits and continue to accrue delayed-retirement credits until age 70. (Note: If the wife collects benefits before her normal retirement age, her spousal benefits -- normally worth half of her husband's benefit -- will be reduced by 25% or more.) At 70, his benefits would be worth 132% of what they would have been at 66, creating a larger base for future cost-of-living adjustments. (Spousal benefits are based on half of the worker's benefit at normal retirement age, not including the delayed credits. But survivor benefits are worth half of the husband's amount, including the delayed credits).

Let's say he is entitled to $2,000 a month at age 66. He could file and suspend so that she could collect half that amount -- $1,000 -- in spousal benefits at her normal retirement age. But if she claims benefits as soon as she is eligible at age 62, her share would be reduced by 25%, to $750 per month. The reduction for collecting benefits early at age 62 will increase to 30% when the normal retirement age rises to 67 under current law.

The elderly are better off than advertised

The following is a very good article that appeared in the Washington Post on May 15 by opinion columnist Robert Samuelson

When House Speaker John Boehner calls for trillions of dollars of spending cuts, the message is clear. Any deal to raise the federal debt ceiling must include significant savings in Social Security and Medicare benefits. Subsidizing the elderly is the biggest piece of federal spending (more than two-fifths of the total), but trimming benefits for well-off seniors isn’t just budget arithmetic. It’s also the right thing to do.

I have been urging higher eligibility ages and more means-testing for Social Security and Medicare for so long that I forget that many Americans still accept the outdated and propagandistic notion that old age automatically impoverishes people. Asks one reader: Who are these “well-off” elderly you keep writing about? The suggestion is that they are figments of my imagination, invented to justify harsh cutbacks in Social Security and Medicare on the needy.
Just the opposite. We see every day that many people in their 60s and older live comfortably — and still would if they received a little less in Social Security and paid a little more for Medicare. The trouble is that what’s intuitively obvious becomes lost in the political debate; it’s overwhelmed by selective and self-serving statistics that cast almost everyone over 65 as being on the edge of insolvency. The result: Government over-subsidizes the affluent elderly. It transfers resources from the struggling young to the secure old.

To correct the stereotype, consult a government publication called “Older Americans 2010, Key Indicators of Well-Being.” It reminds us that Americans live longer and have gotten healthier. In 1930, life expectancy was 59.2 years at birth and 12.2 years at 65; in 2006, those figures were 77.7 and 18.5. Since 1981, death rates for heart disease and stroke have fallen by half for those 65 and over. In this population, about three-quarters rate their own health as “good” or “excellent.”

“Most older people are enjoying greater prosperity than any previous generation,” the report says. Consider:

l From 1959 to 2007, the proportion of the 65-plus population with incomes under the government’s poverty line ($12,968 for a couple in 2009) dropped from 35.2 percent to 9.7 percent, which was half the poverty rate for children under 18 (18 percent).

l  The proportion of elderly living in the “high income” group — defined as four times the poverty line, or almost $52,000 for a couple in 2009 — rose from 18.4 percent in 1980 to 30.6 percent in 2007.

l  In 2007, the median net worth (that is, assets minus debts) of 65-plus households was $237,000, about twice the amount for households aged 45 to 54. Among 65-plus married couples, median net worth was $385,000.

Indeed, half the nation’s wealth is owned by people 55 and older (a third of the adult population), report Eugene Steuerle and Stephanie Rennane of the Urban Institute. The old feel more secure. The National Opinion Research Center regularly surveys Americans about their financial “satisfaction.” In 2010, 82 percent of those 65 and over said they were “satisfied” or “more or less” satisfied. For those under 65, the comparable figure was 66 percent.

Older Americans also fared better in the recession, a 2009 Pew survey found. Among those 18 to 49, 68 percent reported that they “cut back spending” in the past year; for those 65-plus, that was 36 percent.

Social Security and Medicare explain much of this well-being. For millions of older Americans, they are essential; among the poorest two-fifths, Social Security provides 83 percent of their income. But among the richest fifth, its share is only 18 percent.

The problems of old age (chronic illness, outliving savings, loneliness) are real, but age by itself is not an indicator of need. The blanket defense of existing Social Security and Medicare isn’t “liberal” or “progressive.” It’s simply a political expedient with ruinous consequences. It enlarges budget deficits and forces an unfair share of adjustment — higher taxes, lower spending — on workers and other government programs. This is the morality of the ballot box.

People do not lose their obligations to the larger society by turning 65. We need to refocus these programs on their original purposes. Social Security was intended to prevent poverty, not finance recipients’ extra cable channels. Medicare provides peace of mind as well as health insurance; wealthier recipients can afford to pay more for their peace of mind. Burden-sharing needs to include the elderly. This is the crux of the budget problem.

Facing it is both a moral and financial imperative. With the 2012 election looming, major overhauls of these programs seem unlikely. Still, more modest changes (slow increases in eligibility ages, added taxation of Social Security benefits, costlier Medicare for upscale beneficiaries) could produce significant savings. If even these are absent, the meaning will be plain: Old stereotypes continue to trump new realities.

Medicare Part D - prepare to do your homework

The following is an excerpt from an article in SmartMoney Magazine, written by Glenn Ruffenach

Medicare Part D

Spending on prescription drugs in the U.S. totaled about $250 billion in 2009, more than six times the $40 billion spent in 1990. Here are some of the reasons why:
Increased use and demand. From 1999 to 2009, the population grew 9 percent, but the number of prescriptions purchased jumped 39 percent.

*Types of prescriptions written. The best-selling prescriptions are newer, higher-priced brand-name drugs, which have replaced older, less-expensive drugs.
Price increases. Retail prices for prescription drugs increased an average of 3.6 percent annually between 2000 and 2009, versus an inflation rate of 2.5 percent.
Research and development. Only one in five drugs in clinical tests reaches consumers. Manufacturers try to recoup R&D costs for drugs that make it to market—and those that don't.

Picking the right drug plan under this program could save you a bundle—if, and this is the key, you stay on top of changes in your plan.

Typically, you sign up for Part D when you first enroll in Medicare. Ideally, the plan you select will be one that covers the medications you take at the most affordable prices. (Each Part D plan, offered by private insurers, covers different drugs with different premiums and co-payments.) The problem: The plans can (and do) change, dropping drugs here, adding others there, and raising or lowering fees. If you fail to notice, for instance, that your plan no longer covers one of your medications—and if you don't take advantage of the annual opportunity to switch plans—your nest egg takes a hit.

It's a pain in the neck, but you have to do the homework—every year. "A mistake here, depending on how long you allow it to go on, could cost you thousands of dollars," says Joseph L. Matthews, coauthor of Social Security, Medicare and Government Pensions.

*Kaiser Family Foundation

Will working past 65 affect your Social Security payment?

Many people continue to work beyond retirement age, either by choice or out of necessity. But if you are receiving Social Security benefits, you need to be aware of how working can affect your benefit payments. Earning income above Social Security thresholds can cause a reduction in benefits and mean your benefits will be taxed.

Whether it makes sense to work and collect Social Security at the same time is a complicated assessment that depends on how much you earn and when you begin taking Social Security benefits.

How much can you earn and still get benefits? If you were born January 2, 1943, through January 1, 1955, then your full retirement age for retirement insurance benefits is 66. If you work and are full retirement age or older, you may keep all of your benefits, no matter how much you earn. If you are younger than full retirement age, there is a limit to how much you can earn and still receive full Social Security benefits. If you are younger than full retirement age during all of 2011, SS will deduct $1 from your benefits for each $2 you earned above $14,160. If you reach full retirement age during 2011, SS will deduct $1 from your benefits for each $3 you earn above $37,680 until the month you reach full retirement age.