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Financial Impact on Seniors From Recent Changes in Social Security and Medicare

May 3, 2018

Bad news from HealthView Services highlights the combined financial impact of recent changes to Social Security and Medicare that will increase future health care costs and reduce retiree benefits in a new white paper. The paper shows that an average healthy 55-year-old couple earning a combined $140,000 today will, at retirement in 10 years, see a projected total impact of $158,000 in today’s dollars, the result of $122,000 in higher surcharges and the loss of over $36,000 in potential lifetime Social Security benefits.

The new HealthView Services report, “Why Recent Updates to Medicare and Social Security Matter“, details the bottom-line implications for retirees of seven changes to Medicare Means Testing, Social Security Cost of Living Adjustments (COLAs), and Social Security claiming strategies, the most recent of which were implemented in January and announced in February 2018.

“Taken on their own, each of these relatively low-profile changes to Social Security and Medicare have not generally been considered particularly significant or were only believed to impact wealthy Americans,” said Ron Mastrogiovanni, Founder & CEO of HealthView Services. “In this report, we show their collective financial impact on individual retirees’ budgets, and why retirees should anticipate the continued reduction in the value of benefits and increases in their costs.”

Among the changes that have quietly passed under the radar are those to income thresholds at which Americans will be subject to Medicare surcharges. As of February 2018, in the Bipartisan Budget Act of 2018, a new sixth means testing bracket was added to the existing surcharge brackets. This increases the surcharges for those earning more than $500,000 in Modified Adjusted Gross Income.

Although this will impact very few retirees, a more fundamental change introduced at the same time was a delay in the implementation of indexing these brackets to inflation from 2020 to 2028. By postponing indexing for eight more years, as income grows over time more Americans will have to pay surcharges which will increase Medicare Part B and Part D premiums by an average of 36 to 203 percent. This will impact many future retirees. The paper shows a 38-year-old couple each earning $45,000 will have to pay an additional $218,000 (in today’s dollars) in lifetime Medicare surcharges in retirement. If the brackets were to have been indexed as planned in 2020, the couple would have faced no surcharges.

The February changes follow the lowering of Medicare surcharge brackets three to five, which took effect on January 1, 2018. These changes were part of the 2015 “Doc Fix” legislation passed by Congress. As a result, some individuals moved from the third into the fourth bracket, and all fourth bracket beneficiaries moved into the fifth bracket, increasing the surcharges they would have to pay.

For a 40-year-old man currently earning $93,000 today, who receives an average annual salary increase of 3% until retirement at 65, the change in brackets will lead to an additional 55% surcharge on Parts B and D. This will amount to an increase in projected surcharges of $57,000 in today’s dollars ($173,000 in future value). This assumes surcharges will never be indexed to inflation. What’s more, with a two-year look-back policy, for those currently impacted by the changes to income brackets, they will be assessed on 2016 income, rather than 2018 income.

The report also outlines the financial implications of changes over the last three years to Social Security COLAs and the impact of the “hold harmless rule”. With a zero COLA in 2015 and 0.3% increase in 2016, it notes the limited benefit to retirees from the 2% COLA increase in October 2017. Although many retirees had previously been held harmless from the rise in Medicare Part B premiums, the increase in COLA meant they are now subject to these higher costs.

Putting this in context, an average 68-year-old couple receiving their first significant Social Security increase in two years in 2018 will spend 96% of their additional COLA benefit (over $510 in 2018) on readjusted Part B premiums.

The report notes that the effective elimination of the “File & Suspend” and “File Restricted” Social Security strategies in 2016, will cost an average 58-year-old American couple $37,000 in today’s dollars ($72,000 future value) in lost potential benefits.

“Given the pressure on the Medicare and Social Security Trust Funds from increased longevity and greater numbers of retirees, we can expect on-going adjustments to these programs,” added Mastrogiovanni. “Retirees should expect to see more incremental changes to reduce the value of benefits and increase costs. As this paper reveals, in combination, these small changes will have a big financial impact.”

HealthView Services draws upon 70 million health care cases, actuarial, government and economic data to project retirement health care costs. The firm’s rigorous bottom-up approach integrates specific variables – including health status, age, gender, income, and state of residence – that will drive future health care costs. The final calculations draw upon and are consistent with, government health care inflation forecasts.

HealthView Services (http://www.hvsfinancial.com) is the leading provider of retirement health care cost data, Social Security optimization, and long-term care retirement planning tools for financial advisors. HealthWealthLink, the company’s signature service, is an integrated retirement planning tool that assists financial advisors in preparing personalized estimates of retirement health care costs and associated strategies designed to achieve clients’ retirement goals.

Finances News

Funding Our Future: A New Campaign for Improving Retirement Security

February 20, 2018

The Bipartisan Policy Center (BPC) and personal finance expert Ric Edelman announced today the launch of a new initiative, “Funding Our Future: A Campaign for America’s Retirement Security,” to raise awareness and drive action around one of the biggest financial challenges of our time.

Millions of working Americans face the risk of outliving their savings, and a great many lack access to retirement savings plans at the workplace, all while the Social Security Trust Fund faces depletion by 2034. The Funding Our Future campaign will educate policymakers and the American public about these issues, explaining why immediate attention is essential.

The campaign’s goals are to make saving easier for Americans of all ages, help retirees transform their nest eggs into a lifetime of income, and save America’s Social Security system — not only for the millions of seniors relying on its benefits today, but also for future generations. Partners of the campaign will provide educational resources, informing the public about these key issues and why they should get involved.

“We need to take action to improve America’s retirement security before it’s too late,” Ric Edelman, founder and executive chairman of Edelman Financial Services, said. “Through this campaign and partnership, we encourage all Americans to call on their representatives in Congress, to convince them to tackle the problems facing our country’s retirement system so we can improve the well-being of millions of current and future retirees.”

“All Americans — from millennials to baby boomers, those who live in cities and those who live in rural areas — deserve the opportunity and tools to pursue a secure retirement. As longevity increases, these challenges only grow more critical,” Jason Grumet, BPC president, said. “We are creating this coalition to bring attention to an issue that affects the lives of all Americans and show that constructive policy solutions exist.”

Joining BPC and Edelman in this campaign to inform the public and policymakers about retirement security and to make the issue a priority are:

The Aspen Institute Financial Security Program
BPC Action
The Employee Benefit Research Institute
Prosperity Now
UnidosUS
The Women’s Institute For A Secure Retirement

Funding Our Future looks forward to adding new partners to this coalition in the coming months.

Finances News

Older Workers Change Jobs

January 15, 2018

Nearly half of older workers have changed jobs since turning 50. Although it may seem daunting to some, starting over doesn’t mean you’re starting from scratch. In the January/February issue, AARP Bulletin highlights 16 people who reinvented their careers after age 50 and reveals how they found deeper joy and satisfaction – and often, financial success. From a corporate attorney turned organic farmer to a cancer survivor reclaiming her health as a skincare entrepreneur, or a former pastor finding a second life as a bed and breakfast owner, AARP Bulletin highlights how they achieved prosperity and how you can too.

The special report provides need-to-know insights and advice on how to navigate career changes later in life, whether it’s a career path marked by a new job, new start, or even a new business. Additionally, the guide outlines the seven benefits of experience that come into play during a new career, the four common missteps to avoid, and helpful online tools from AARP to find a second career that’s right for you.

CNBC also has some interesting ideas for second careers. Take a look here: https://www.cnbc.com/2011/12/28/New-Careers-After-50.html

Other stories in the January/February AARP issue:

Health

New Brain Health Study: Do you remember all those reports on how red wine, dark chocolate and caffeine-rich drinks might help your brain stay sharp? Think again. In this month’s issue, AARP Bulletin features a special report from the Global Council on Brain Health that challenges the popular thinking about the benefits of all three and recommends the best foods to help keep your brain sharp.

How Safe Is Your Supermarket?: AARP Bulletin’s January/February issue provides a guide to navigating the microbial villains such as E. coli, salmonella and listeria that may be lurking in your neighborhood supermarket. Learn where and how bacteria may be hiding at your grocery store – in teriyaki sauce disguising almost-expired meat to store-sliced deli meats tainted with listeria – as well as tips on what to look for when choosing your foods and what to avoid.

Fraud

America’s Veterans Targeted by Crooks: Approximately 80 percent of America’s military heroes have been targeted by a veteran-specific scam in the past five years, according to an AARP report. In this month’s issue, AARP Bulletin features a special report on the top scams hurting America’s finest, how these scams work, tips to combat them, and Operation Protect Veterans – a new joint campaign of AARP and the U.S. Postal Inspection Service.
Tech

Hey, Speaker, How Do I Make You Work?: More than 35 million Americans used a smart speaker at least once a month last year, more than double the usage in 2016, according to an AARP report. In this month’s issue, AARP Bulletin reveals how these popular smart speakers can help older Americans, the endless possibilities for connecting and commanding other technologies, and five surprising ways to use your smart speaker.
Learn more at http://www.aarp.org/bulletin/.

Finances News Practicalities of Living

Grandparent Scam

January 14, 2018

Recent cases of two senior citizens in Pennsylvania falling victim to the “Grandparent Scam” are reminders that people of all ages need to pay attention to details and exercise caution before sending money across long distances and state or international borders, says Secretary of Banking and Securities Robin L. Wiessmann.

Senior citizens in Berks and Bucks counties were victimized and lost thousands of dollars to criminals who followed this script:

A grandparent receives a phone call and a young voice says, “Hi Grandma (or Grandpa), it’s me.” In a moment of confusion, the grandparent answers this greeting with something like “Yes, Michael (or Sharon). How are you?” Alternatively, a stranger purporting to be an attorney, law enforcement official, or friend may be on the line claiming a grandchild has been arrested or is in otherwise dire straits.

The scam artist tells the victim about an emergency – legal trouble in a foreign country, a medical emergency, or a lost/stolen wallet – and that grandma or grandpa can help by wiring money to a faraway city.

The caller will then swear “grandma” to secrecy (“mom and dad will get angry if they know about the trouble I’m in”) or will insist the grandparent’s action is required far too swiftly to allow time to contact other family members.

The victim then wires hundreds or even thousands of dollars to the faraway city. Sometimes the scam continues for days or weeks, with follow-up calls explaining that for whatever reason, the first wire transfer did not contain enough money and the “grandchild” needs more money wired immediately.

Wiessmann noted that once the wire transfer is completed, the money most likely cannot be recovered. She advised senior citizens to take the following steps to protect themselves from the Grandparent Scam:

Call your relative back using a phone number known to you. If you receive this kind of phone call, contact the grandchild who is supposedly involved by reaching them through a known phone number or check it out with your grandchild’s parents before you decide to help someone claiming to be a family member or friend. If they are really your family, your grandchild will understand your need to verify the information you are being given.

Ask the caller personal questions known only to family members. Engage the caller in conversation about issues that only family members would know involving information not easily obtainable. Ask about their birthdate or school they attend – or ask them what they got for Christmas from you last year, or ask them to give you the name of the pet cat or dog you have had for as long as they can remember.

Don’t send money right now. Scammers will play on your emotions and push you to act quickly, but there are few faraway emergencies that require you to act immediately.

Be cautious about wire transfers – that money cannot be recovered. Wire transfers are typically the preferred payment method of scam artists. Any request for a wire money transfer should be approached with extreme caution.

Review personal information posted on social media. Be careful about the personal information you post on social media sites like Facebook or Twitter and advise your family members to be cautious as well. Sometimes this is just enough personal information on social media that anyone can see to help a scam artist convince you that they know you.

If you believe you have fallen victim to this or any other scam, contact the Pennsylvania Office of Attorney General (1-800-441-2555) or your local law enforcement.

Anyone can contact the Department of Banking and Securities at 1-800-PA-BANKS or 1-800-600-0007 to ask questions or file complaints about financial transactions, companies, or products. Members of the public are also invited to connect to the department through Facebook and Twitter, or by subscribing to the department’s newsletter http://www.dobs.pa.gov/Pages/default.aspx.

Finances Health News Practicalities of Living Travel

Before You Buy Your Travel Insurance

January 12, 2018

TravelInsurance.com today outlined five key points retirees should consider in regard to travel insurance before they hit the road in the coming year.

“While travel can be complicated at any age, retirees are faced with additional considerations, especially when it comes to medical coverage,” said Stan Sandberg, co-founder of TravelInsurance.com. “There are not only ways to save on your next travel insurance policy, but also things to keep in mind to ensure you are taken care of under unforeseen circumstances.”

Here are five things retirees should consider when purchasing travel insurance:

Medicare doesn’t provide coHealthcareide the United States. Health care received outside the U.S. is generally not covered under standard Medicare plans. Travel insurance can provide emergency travel medical coverage with limits that can reach $250,000 per person or more. For extreme situations where an overseas hospital can’t handle the emergency, most travel insurance plans offer Emergency Evacuation coverage with limits up to $1.0 million per person. Retirees planning to travel overseas multiple times a year should consider purchasing Medicare supplement insurance or a Medigap plan. However, since Medigap plans can have deductibles, lifetime coverage limits up to $50,000, and limits on the length of trip, most retiree travelers may find single-trip travel insurance a better option.

Purchase travel insurance early to qualify for a pre-existing condition waiver. Most travel insurance plans will exclude coverage for losses that stem from a pre-existing condition. However, many plans offer a Pre-Existing Condition Exclusion Waiver (meaning pre-existing conditions will be covered). To qualify, one must meet certain requirements, the most important being to purchase the travel insurance plan within a strict time window – usually 7-21 days – from when the initial payment was made. Also, travelers typically need to insure 100% of their pre-paid and non-refundable trip costs. For travelers with pre-existing conditions, this is one of the most important considerations in purchasing a plan, as prior injuries, illnesses, diseases or other types of medical conditions in which any treatment or care was sought in the 6-12 month period prior to the policy effective date all fall into this category. We highly recommend travelers speak to a licensed agent to see if they qualify for a Pre-Existing Condition Waiver or read full coverage details prior to buying.

If you’re traveling with a group, you can save money with Group Travel Plans. Some Group Travel Plans do not factor in traveler ages when pricing the cost of travel insurance, which can make plans more affordable to older travelers. Typically, to qualify for this coverage, the group must include at least 10 individuals all traveling on the same itinerary on similar dates. Group plans are also designed for easy administration by a group leader who can manage sign-ups and changes on behalf of each individual.

Trip Cancellation provides greater flexibility for those who need it. Unlike Medigap coverage, travel insurance can offer trip cancellation and interruption coverage. This coverage can cover the reimbursement of trip costs due to a range of unexpected circumstances, from last-minute illnesses to severe weather and natural disasters. For the most flexibility, travelers may consider purchasing a plan with a Cancel for Any Reason (CFAR) upgrade, which provides reimbursement for up to 75% of the total trip costs for a cancellation for any reason, as long as the cancellation occurs more than 48 hours prior to the trip departure date. This benefit is usually only available if the policy is purchased within 7-21 days of the initial trip payment and 100% of pre-paid and non-refundable trip costs are insured.

You can buy travel insurance for your activities, too. Just because travelers are retired doesn’t mean they aren’t adventurous. For the active or adventure traveler, we recommend plans that offer Hazardous or Adventure Sports coverage, which provide coverage for higher risk activities, such as heli-skiing, off-trail snowboarding, bungee jumping, rock climbing or SCUBA diving below a certain depth. If travel entails any of those activities, travelers will need travel insurance plans that offers coverage for those specific activities.

About TravelInsurance.com
https://www.travelinsurance.com/ helps simplify the complicated world of travel insurance by providing consumers with the easiest way to compare and buy trip insurance coverage online. A member company of the U.S. Travel Insurance Association, owned and operated by DigiVentures Holdings, LLC, a licensed agency that works with some of the largest travel insurers in the industry. Purchases can be made directly through the website, with policies sent via email within minutes.

Finances Life News

Mediterranean Towers Ventures Invests in Quality of Life Improvements for Elderly

July 21, 2017

Pictured, from right to left: Mr. Dov Sugarman, Co-CEO of Mediterranean Towers Ventures Viacheslav; Dr. Yael Benvenisty, Co-CEO of Mediterranean Towers Ventures; Mr. Doron Arnon, Director General of Mediterranean Towers ;Mr. Yair Serrousi, Chairman of Mediterranean Towers; Fradin, TASE CRO and Ittai Ben-Zeev, TASE CEO. Photographer: Guy Assayag (photo free-of-charge).

According to The Motley Fool, “For the next 18 years, a staggering 10,000 baby boomers will turn 65 every day, increasing demand for everything from golf clubs to assisted living facilities.” An Israeli firm is doing something about that.

Recently the Tel Aviv Stock Exchange Market Open Ceremony was led by managers of Mediterranean Towers Ventures – a new investment fund that will focus on innovative technologies for older adults. The fund will invest in startups which develop solutions to improve the quality of life for the elderly, in all aspects of life: health, culture and leisure, security and safety, loneliness, etc.

During the first year, the fund intends to primarily focus on start-ups in their initial stages in order to help the selected entrepreneurs to become leaders and groundbreakers in the worlds of older adults.

Yair Seroussi, former chairman of Bank Hapoalim and chairman of the Mediterranean Towers chain will take on the position of Chairman of the Fund’s investment committee.  The committee will consist of additional members, including Doron Arnon, CEO of the Mediterranean Towers chain. The Fund is managed by Dr. Yael Benvenisti and Mr. Dov Sugarman.

Mediterranean Towers (TASE: MDTR) is a public company traded on the TA-125 index and its entry into the field of investments in technologies for older adults expands the company’s areas of activity and aligns with the chain’s vision, that is to develop and improve the quality of life of the elderly, which is the fastest growing population in the world and also in Israel.

Yair Seroussi, chairman of Mediterranean Towers and chairman of the Fund’s Investments Committee said, “We are proud to be the first to invest in this important field of technological innovations for older adults, and we hope that our entry into the field will encourage additional ventures and developments for the population of older adults. With the increase in life expectancy and the rapid growth rate of the population of older adults in the world the technology is becoming more and more relevant and there is a need to find ways to improve the quality of life of the elderly. The Mediterranean Towers is an innovative chain of retirement communities that operates according to the worldview – “Living here is interesting”, therefore, establishing the fund is another layer in our worldview. Beyond the economic and social movements, the Fund will also promote a connection between the older adults and the younger generation, thereby encouraging new ideas and initiatives that we hope will lead to the development of products which will help the country’s senior citizens.   We believe that Israel can lead in global technology for older adults, as it has done in the past in other fields of technology, and we are proud to be pioneers in this field.”

For more information: http://www.mondovisione.com/media-and-resources/news/management-of-mediterranean-towers-ventures-israels-first-fund-for-investments/

Finances News

Are You Working For Pennies?

September 27, 2016

People in their 60s who keep on working can face extremely high tax rates – much higher than the rates faced by millionaires and billionaires, according to a new study.

“Senior workers earning an average income can easily lose more than half of their earnings to higher taxes and reduced government benefits,” said Boston University economist Laurence Kotlikoff, one of the researchers who produced the study. “In some cases, workers can lose 95 cents out of each dollar they earn.”

Kotlikoff, who is also a Senior Fellow at the Goodman Institute, produced the study with Alan Auerbach, an economist at the University of California at Berkeley and two additional authors. The project was funded by the Sloan Foundation and is based on an analysis of penalties for working that arise from roughly 30 major federal and state tax and transfer programs. The economists also consider how the additional earnings, a part of which will generally be saved, will affect future taxes and transfers. The entire impact is summarized in what is called the worker’s “lifetime marginal net tax rate.”

“Millions of elderly citizens are mentally and physically capable of making major contributions to our economy,” said Kotlikoff. “We are all made worse off when these people are pushed out of the labor market by policies that encourage them to retire.”

The study finds that the Social Security System is one of the most important sources of penalties for working. For example:

  • Beyond a certain income level, early retirees from age 62 to 66 lose 50 cents of Social Security benefits for each dollar they earn – a 50 percent tax rate.
  • From Jan. 1st in the year in which they turn 66 until their 66th birthday, they lose 33 cents of benefits for each dollar of wages – a 33 percent tax rate.

These taxes are on top of income, payroll and other taxes.   Although the government begins adding the benefit reduction back once the worker reaches the normal retirement age, many seniors don’t realize that or don’t understand it.

“If we abolished these ‘earning penalties’ the government would probably be a net winner. Seniors would work more and earn more and the other taxes they pay would more than make up for any short-term revenue loss,” said Kotlikoff.

Another impediment to work is the Social Security benefits tax:

  • Beyond a certain threshold, seniors must pay income taxes on 50 cents of Social Security benefits for each dollar they earn – increasing their marginal tax rate by 50 percent.
  • If they earn even more income, they will reach a point where they must pay income taxes on 85 cents of Social Security benefits for each dollar they earn – increasing their marginal tax rate by 85 percent.

When the Social Security benefits tax is added to the earnings penalty, the tax rate on moderate-income seniors can actually reach 95 percent.

The Social Security benefits tax also imposes very high rates on savings. For example, for someone in the 15% bracket for ordinary income:

  • The Social Security benefits tax can increase the tax rate on pension income and IRA withdrawals from 15% to 27.75%
  • It can raise the tax on capital gains and dividend income from zero to 12.75%
  • Tax-exempt income can also be taxed at a rate of 12.75%.

“These high marginal tax rates only hit in the middle of the income ladder. They don’t affect the work incentives of the rich or the poor,” said Kotlikoff. “However, the loss of the Earned Income Tax Credit and the potential loss of Medicaid and other entitlement benefits create high marginal tax rates for low-income workers in other ways.”

See examples here: http://www.goodmaninstitute.org/wp-content/uploads/2016/09/Marginal-Tax-Rate-on-Wages.pdf