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Posts Tagged ‘social security’

A Small Change to Social Security in 2017 with a Possible Medicare Premium Hike

Monday, October 24th, 2016

The average Social Security recipient will receive a whopping $5 per month raise next year. In 2017, Social Security’s mean monthly benefit is projected to rise, from the current $1,355, by this scant amount because of low yearly inflation measured by the federal government.

Social Security cost-of-living adjustments (COLAs) are tied to changes in the CPI-W. The CPI-W is the Consumer Price Index (CPI) that measures inflation for urban wage earners and clerical workers. If that seems a bit incongruous to you, it also does to senior advocacy groups. They would prefer that these COLAs be based on the CPI-E, a version of the CPI that tracks consumer costs for the elderly.

The CPI-E gives more weight to increases in medical and housing costs than the CPI-W. If Social Security COLAs were linked to the CPI-E, the thinking goes, they might be greater. Data from the Bureau of Labor Statistics backs up this assertion, as healthcare costs alone advanced 5.1% in the 12 months ending in August 2016.

Medicare payments might jump for some seniors. While most Social Security recipients will see all of their 2017 “raise” go toward covering Medicare Part B premiums, some may not. Federal law governing Social Security limits annual Medicare Part B premium increases for 70% of Social Security recipients, with the other 30% left to shoulder most of the burden. Just who makes up that other 30%? Seniors who will be enrolling in Part B for the first time in 2017, Social Security recipients whose income already prompts them to pay higher Part B premiums, and people who currently receive Medicare benefits but collect no Social Security.

Those groups could see their Part B premiums rise 22% next year or $149 a month, according to the latest Medicare Trustees Report – unless the federal government acts fast. In late 2015, a large premium increase was reduced when the U.S. Treasury loaned $7 billion to Medicare.

The tiny 2017 Social Security COLA at least beats expectations. Social Security’s Board of Trustees had forecasted the mean monthly benefit to rise 0.2% in 2017, not even $3 a month for the average recipient. Monthly Social Security benefits have risen an average of 2.3% per year since 2000, even with no COLAs occurring in 2009, 2010, and 2016.

Reducing the Risk of Outliving Your Money

Tuesday, April 26th, 2016

“What is your greatest retirement fear?” If you ask retirees that question, “outliving my money” may likely be one of the top answers. A 2014 Wells Fargo/Gallup survey of more than 1,000 investors revealed 46% of respondents citing the fear of outliving their money; 42% of the respondents were making $90,000 a year or more.  

Retirees face greater “longevity risk” today. According to an analysis of Census Bureau data by the Center for Retirement Research at Boston College, the average retirement age in the United States is 65 for men and 63 for women. Many of us will probably live into our eighties and nineties. In 2014, over 72,000 Americans were centenarians, an increase of 44% since 2000.

If your retirement lasts 20, 30, or even 40 years, how well do you think your retirement savings will hold up? What financial steps could you take in your retirement planning to prevent those savings from eroding? As you think ahead, consider the following possibilities and realities.

Realize that Social Security benefits might shrink in the future. Today, there are three workers funding Social Security for every retiree. By federal estimates, there will be only two workers funding Social Security for every retiree in 2030. That does not bode well for the health of the program, especially since nearly one-fifth of Americans will be 65 or older in 2030.  

Social Security’s trust fund is projected to run dry by 2034, and it is possible Congress may intervene to rescue it before then. Still, the strain on Social Security will mount over the next 20 years as more and more baby boomers retire. With this in mind, there’s no reason not to investigate other potential retirement income sources now. 

Understand that you may need to work part-time in your sixties and seventies. The income from part-time work can be an economic lifesaver for retirees. Suppose you walk away from your career with $1,000,000 in retirement savings. In your first year of retirement, you decide to withdraw 4% of that for income, or $40,000. At that withdrawal rate, not adjusting for inflation, that money will be gone in 21 years. What if you worked part-time and earned $40,000-60,000 a year? If you can do that for five or ten years, you effectively give your retirement savings five or ten more years to last and grow.

Retire with health insurance and prepare adequately for out-of-pocket costs. Financially speaking, this may be the most frustrating part of retirement. Striving to work until you are eligible for Medicare makes economic sense. Building some kind of health care emergency fund for out-of-pocket costs is also a solid financial goal. According to data from Health Affairs, healthcare costs approached $16,000 a year in 2014 for Americans aged 65-84, and $35,000 a year for Americans aged 85 or older.

Many people may retire unaware of these financial factors. With luck and a favorable investing climate, their retirement savings may last a long time. Luck is not a plan, however, and hope is not a strategy. Those who are retiring unaware of these factors may risk outliving their money.

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Please be aware that you are leaving www.kendallcapital.com and will be redirected to a third party website. Kendall Capital has no control over information at any third party site accessed from www.kendallcapital.com. Kendall Capital makes no representation and is not responsible for the quality, content, nature, or reliability of any linked site. The inclusion of any link does not imply endorsement, investigation, verification or monitoring by Kendall Capital. In no event shall Kendall Capital be responsible for your use of a third party site. Thank you for visiting Kendall Capital's website.

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Please be aware that you are leaving www.kendallcapital.com and will be redirected to a third party website. Kendall Capital has no control over information at any third party site accessed from www.kendallcapital.com. Kendall Capital makes no representation and is not responsible for the quality, content, nature, or reliability of any linked site. The inclusion of any link does not imply endorsement, investigation, verification or monitoring by Kendall Capital. In no event shall Kendall Capital be responsible for your use of a third party site. Thank you for visiting Kendall Capital's website.

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Please be aware that you are leaving www.kendallcapital.com and will be redirected to a third party website. Kendall Capital has no control over information at any third party site accessed from www.kendallcapital.com. Kendall Capital makes no representation and is not responsible for the quality, content, nature, or reliability of any linked site. The inclusion of any link does not imply endorsement, investigation, verification or monitoring by Kendall Capital. In no event shall Kendall Capital be responsible for your use of a third party site. Thank you for visiting Kendall Capital's website.

Please be aware that you are leaving www.kendallcapital.com and will be redirected to a third party website. Kendall Capital has no control over information at any third party site accessed from www.kendallcapital.com. Kendall Capital makes no representation and is not responsible for the quality, content, nature, or reliability of any linked site. The inclusion of any link does not imply endorsement, investigation, verification or monitoring by Kendall Capital. In no event shall Kendall Capital be responsible for your use of a third party site. Thank you for visiting Kendall Capital's website.

Please be aware that you are leaving www.kendallcapital.com and will be redirected to a third party website. Kendall Capital has no control over information at any third party site accessed from www.kendallcapital.com. Kendall Capital makes no representation and is not responsible for the quality, content, nature, or reliability of any linked site. The inclusion of any link does not imply endorsement, investigation, verification or monitoring by Kendall Capital. In no event shall Kendall Capital be responsible for your use of a third party site. Thank you for visiting Kendall Capital's website.

Please be aware that you are leaving www.kendallcapital.com and will be redirected to a third party website. Kendall Capital has no control over information at any third party site accessed from www.kendallcapital.com. Kendall Capital makes no representation and is not responsible for the quality, content, nature, or reliability of any linked site. The inclusion of any link does not imply endorsement, investigation, verification or monitoring by Kendall Capital. In no event shall Kendall Capital be responsible for your use of a third party site. Thank you for visiting Kendall Capital's website.