There is little doubt that Medicare and Social Security are important programs that help older Americans in retirement, particularly now that so many are living beyond previous life expectancy rates. In fact, past models for savings rates may be failing many older Americans, who represent the only demographic seeing significant increases in poverty rates in recent years. Specifically, between 2015 and 2016, the poverty rate for people over 65 grew to 14.5 percent.1
While younger Americans may still have time to adapt to higher savings rates, the situation is more complex for people who are already retired. If you’re fortunate enough to live many years after retirement, you’re going to need a well-thought-out retirement income strategy. Using a variety of insurance products, we can help you create a strategy designed to help you to live the kind of retirement you’ve worked hard for. Give us a call so we can sit down and discuss your retirement income goals.
If you haven’t yet applied for Social Security, consider developing a strategy to help maximize benefits. If you don’t, you could be leaving money on the table. Here’s an example of why you should consider all your options:
Widows and widowers can file for a restricted application to initially claim survivor benefits while delaying their own benefit until age 70. This will allow their personal benefit to grow by approximately 8 percent a year from full retirement age, which is 65 to 67, depending on when they were born (note that survivor benefits do not increase). A recent report published by the Social Security Administration Office of Inspector General found that beneficiaries who could have used this strategy, but did not, missed out on about $131.8 million in total increased payouts. The study cited one example of a widow who would have received an additional $13,000 in benefits by utilizing this strategy.2
Many retirees count on programs like Medicare and Social Security for helping meet their health care and income needs. However, there is some concern about these programs’ financial health. One area of concern is that the programs may not be adequately represented to help shape congressional policy regarding their long-term solvency. There are currently two vacancies on the boards overseeing Social Security and Medicare — seats that have been empty for more than two years.3
Meanwhile, starting next year, Medicare recipients with annual incomes higher than $500,000 ($750,000 for couples) are scheduled to pay a higher percentage of their Medicare bills. They will pay 85 percent of the program’s parts B and D costs, up from 80 percent. The average Medicare beneficiary pays around 25 percent of bills. This change was included as part of Congress’ stop-gap budget deal signed into law in February.4
As for the future, trustees of both Medicare and Social Security are asking lawmakers to take action to help make sure recipients get full benefits in the future. In their respective 2017 annual reports, Social Security trustees predict that the trust fund will run out by 2034, which will trigger a projected 23 percent reduction in benefits, and Medicare trustees expect the trust fund for Part A to be depleted by 2029, at which point it would only be able to pay out 88 percent of expected benefits.5
1 Alana Semuels. The Atlantic. Feb. 22, 2018. “This Is What Life Without Retirement Savings Looks Like.” https://www.theatlantic.com/business/archive/2018/02/pensions-safety-net-california/553970/?utm_source=fbb. Accessed March 1, 2018.
2 Ray Martin. CBS News. Feb. 22, 2018. “Social Security underpays thousands of widows and widowers.” https://www.cbsnews.com/news/social-security-underpays-thousands-of-widows-and-widowers/?ftag=CNM-00-10aab7e&linkId=48472768. Accessed March 1, 2018.
3 Charles P. Blahous III and Robert Reischauer. Rollcall.com. Jan. 22, 2018. “Opinion: Now More Than Ever, Social Security and Medicare Need Their Public Trustees.” https://www.rollcall.com/news/opinion/avoid-crisis-confidence-medicare-needs-public-trustees. Accessed March 1, 2018.
4 Brittany De Lea. Feb. 27, 2018. “Medicare beneficiaries with higher incomes to foot bigger share of costs.” https://www.foxbusiness.com/features/medicare-beneficiaries-with-higher-incomes-to-foot-bigger-share-of-costs. Accessed March 1, 2018.
5 Donna Borak. CNN Money. July 13, 2017. “Social Security trust fund projected to tap out in 17 years.” http://money.cnn.com/2017/07/13/news/economy/social-security-trust-fund-projection/index.html. Accessed March 27, 2018.
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We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.
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