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Retirement Planning > Social Security

Learning from the Social Security report card

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The trustees for the Social Security and Medicare programs are required to report the financial condition of these programs annually. These reports are of great interest to future retirees. However, I believe that our seniors, the people already using these programs, must also begin to pay attention to them.

The health or weakness of these programs will be cause for great concern for our seniors in the future. Weak programs mean weak benefits. The reports highlight some serious changes we will need to make to keep these programs strong.

The Medicare Part B physician care and Medicare Part D prescription drug benefit programs are currently in good shape financially because the government can reset Medicare rates and general revenue support each year for these programs. However, as more baby boomers enroll in these programs they will consume much higher percentages of GDP in the future. This is cause for concern for all Americans because there will only be money for Medicare, and nothing else.

The Old Age and Survivors Insurance fund, the largest part of the Social Security trust fund, probably will not run out of money until 2041. To fix Social Security we would have to increase the Social Security payroll tax from 12.4 percent to 15.6 percent, or reduce benefits immediately and permanently by 20 percent. While current recipients are in no danger of reduction or loss of benefits, the future looks to be significantly more difficult for seniors’ children.

But I have saved the best for last! The Medicare Hospital Insurance fund faces enormous financial challenges. To erase the huge shortfalls in this program we would have to raise the payroll tax for the hospital fund from 2.9 percent to 6.44 percent, or reduce the benefits for this program immediately and permanently by a staggering 51 percent.

The report actually states that it is conceivable that a person currently in their fifties could arrive at age 65 and have no Hospital Medicare Insurance available. Furthermore, people already on the program could suffer some consequences because they are living longer than ever before.

It is our responsibility as advisors to keep our seniors informed of the results of this report every year. If we delay repairing these programs, and I believe we will delay, the remedies will be even more jarring and severe.

It will be vital to the planning of a successful retirement to continue to be apprised of this information. We are the only people who can rescue our prospects and clients from the coming financial storm. Share this report with them now.

Van Mueller
, LUTCF, is an insurance agent, professional writer and speaker. Responses and questions can be sent to [email protected].


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