Recently, two reports that are vital to the financial well-being of seniors were released to the public.
The first says that there will be no cost of living increase for Social Security in 2010. The increase could also be eliminated in 2011 and 2012. Meanwhile, premiums for Medicare Part B and Part D will increase substantially. Even with no increase in income there will be an increase in expenses!
The second report illustrates enormous increases in health care costs for Americans, with seniors bearing the brunt of those increases.
This report is issued every May by the Trustees for Social Security and Medicare. Google that organization’s name to get a copy of the 240-page report and 12-page synopsis. The information is clear and concise–and, I might add, frightening.
A huge fix
Fixing Social Security for just 75 more years would require an increase in payroll taxes from 12.4 percent to 14.4 percent immediately and permanently, or a reduction in benefits immediately and permanently, or some combination of the two. A permanent fix would require additional increases and/or decreases.
But Medicare is the real nightmare that awaits the American taxpayer. Fixing Medicare for 75 years would require payroll taxes to more than double (from 2.9 percent to 6.78 percent) immediately and permanently, or benefits to be cut by more than half (53 percent) immediately and permanently, or some combination of the two. A permanent fix would require larger increases and/or decreases. Without any changes, the hospital portion of Medicare will go bankrupt in 2017.
Here are some additional facts from the report. First, the unfunded liability for Social Security is $17.5 trillion and $36.4 trillion for Part A of Medicare. The unfunded liability for Part B of Medicare is $37 trillion. The unfunded liability for Part D of Medicare is $15.5 trillion. This totals $106.4 trillion.
Upsidedown on our payments
To give this some context, the total net worth of our country is only $51.5 trillion, less than half of what we will owe!
Government will not be able to take care of our seniors. You are the only professionals with the tools to keep them safe! You can help them to prepare. If you tell them this is coming, they will make an emotional investment in finding a solution with you!
Advanced planning will be required. Managing taxes and health care expenses will become an important part of retirement planning. Strategies for reducing taxes, maximizing income, leveraging assets and managing even more volatile risk will allow our prospects and clients to stay in control of their lives.