On Retirement

Social Security and Medicare issues get personal

Forced to slow down, columnist contemplates the future of retirement

Aug 6, 2019 @ 11:00 am

By Mary Beth Franklin

From time to time, I write a "dispatch from the retirement front" based on personal insights from living with a retired husband or fielding questions during girlfriend getaways about enrolling in Medicare and claiming Social Security benefits.

This summer I had my own brush with contemplating the future of retirement — both from a national policy standpoint, as well as on a more personal level. Don't worry. I'm not retiring any time soon. But following some major surgery in July, I was forced to slow down. For a few weeks, I perfected the art of doing nothing and wondered whether this is what retirement would be like for me.

My first decision was whether to delay my surgery until December when I would qualify for Medicare and could significantly reduce my out-of-pocket costs for the procedure or to get it over with this summer when my business travel schedule for speaking engagements tends to be lighter. After weighing the pros and cons, I decided that timing and health concerns outweighed the financial costs.

(More: Confusion around Medicare enrollment)

Because I spent more time home than usual during my recuperation, I was exposed to a slew of robocalls, including one purportedly from Social Security telling me my account had been suspended.

The first hint that such phone calls are bogus is the recording refers to the "Department of Social Security." There is no such thing. Besides, the Social Security Administration doesn't call individuals to tell them their accounts have been suspended due to "suspicious activity." Crooks are just trying to scare people into giving them their Social Security numbers and other personal data that leads to identity theft. Just hang up.

The Federal Communications Commission offers some great consumer tips — or helpful client tips — on how to recognize and combat such robocalls and spoofing, which is when a caller deliberately falsifies the information transmitted to your caller ID display so it appears that an incoming call is coming from a local number or a government agency.

I can imagine how scary such phone calls can be to your retired or soon-to-be retired clients.

In contemplating my own retirement, I examined what the experts have to say about preparedness and what lawmakers are doing — or not — to add protections.

About 90% of Americans 65 and older receive Social Security benefits today. That's more than 64 million people collecting about $1 trillion in Social Security benefits this year. But there is a huge gap between the Social Security income retirees receive and the total amount of retirement income they may need over their lifetime.

New research from the Alliance for Lifetime Income, a consortium of leading financial services organizations and non-profit consumer groups, shows 63% of Americans are unprotected for retirement, meaning they have no source of guaranteed lifetime income other than Social Security.

More than three-quarters (80%) of non-retired Americans expressed anxiety that their savings may not provide enough to live on in retirement, based on an a survey of more than 3,000 U.S. adults that the Alliance conducted in May 2019. There is good reason for Americans to be concerned about running out of money in retirement. A June 2019 World Economic Forum report estimates that 65-year-old Americans could outlive their retirement savings within nine years.

Given the sheer number of retirees, a retirement income crisis would be felt far and wide. The U.S. is a mere five years away from having the most 65-year-olds in history. In 2024, a record 4.5 million Americans will turn 65

While these statistics underscore the growing importance of Social Security for many Americans, the nation's retirement program is facing some serious long-term financing problems of its own.

Beginning next year, Social Security is expected to start dipping into trust fund assets for the first time to pay all promised benefits, according to the most recent Social Security and Medicare trustees report. Those excess revenues would be depleted in about 15 years, forcing a 20% cut in benefits to all retirees unless Congress acts before then.

No one expects the worst to happen, but Social Security reform will require bipartisan support, and the sooner lawmakers tackle the problem, the better. But you would never know it based on the recent Democratic presidential candidates' debates, where Social Security was never mentioned, or Congress' inaction on the looming trust fund shortfalls.

(More:Why healthy clients need to save more for retirement)

To be fair, the House Ways and Means Committee did hold a hearing to discuss Social Security reform proposals in late July, but took no action before the House left town for its summer recess.

Generally, Democrats want to protect current and future Social Security benefits by gradually raising payroll taxes for workers and employers. Republicans oppose tax increases without program reforms, and they want to eliminate restrictions on how much people can earn while collecting benefits before full retirement age. The two parties remain far apart as the clock continues ticking.

(Questions about Social Security? Find the answers in my new ebook.)

Mary Beth Franklin is a contributing editor to InvestmentNews and a certified financial planner.

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