Thread: Social Security and Government Retirement

A fiscally savvy co-worker of mine (about my age and FERS also) told me back about 15 years ago that he wasn't counting on SS being there when we retire. I looked at him like "what are you talking about?". He didn't explain his reasoning very effectively to this fiscally naive person back then, but it put me on the alert for signs of national financial problems coming nonetheless and I'm grateful for that heads up all those years ago.

Thank God for the internet. I've learned more about high finance and national/international economics and their inter-relationships in the past 3 years via bloggers and i-newspapers and financial websites, including this one, than I did regularly reading investment books, financial magazine articles, Wall Street Journal and subscribing to AA Individual Investor over the past 20 years. Sheesh.

Millions face shrinking Social Security payments

By STEPHEN OHLEMACHER, Associated Press Writer

http://news.yahoo.com/s/ap/20090823/...smaller_checks

WASHINGTON – Millions of older people face shrinking Social Security checks next year, the first time in a generation that payments would not rise. The trustees who oversee Social Security are projecting there won't be a cost of living adjustment (COLA) for the next two years. That hasn't happened since automatic increases were adopted in 1975.

By law, Social Security benefits cannot go down. Nevertheless, monthly payments would drop for millions of people in the Medicare prescription drug program because the premiums, which often are deducted from Social Security payments, are scheduled to go up slightly.

"I will promise you, they count on that COLA," said Barbara Kennelly, a former Democratic congresswoman from Connecticut who now heads the National Committee to Preserve Social Security and Medicare. "To some people, it might not be a big deal. But to seniors, especially with their health care costs, it is a big deal."

Cost of living adjustments are pegged to inflation, which has been negative this year, largely because energy prices are below 2008 levels.

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Assume Nothing...


State of Social Security requires early planning
Carolyn Bigda Getting started
August 23, 2009

"In 2016 we will begin paying more in benefits than we collect in taxes. Without changes, by 2037 the Social Security Trust Fund will be exhausted, and there will be enough money to pay only about 76 cents for each dollar of scheduled benefits." (Since the latest statements came out, the forecast was revised to 2017 and 2041.)

The trust fund is the repository of the surplus if Social Security collects more in payroll taxes than it pays out in any one year.

But thanks to the number of Baby Boomers nearing retirement, that trust fund soon will come into play as the payouts will exceed incoming taxes. With the clock ticking and resources limited, it would be wise to examine Social Security's, and your, future.

To fix Social Security, benefits have to be reduced, whether through higher taxes or smaller payouts.

More of Social Security benefits could be subject to tax, according to the Center for Retirement Research at Boston College, while premiums for certain Medicare coverage, which are deducted from benefits, are expected to rise.

So Social Security will provide less income for retirees. According to a 2003 study by the Boston College group, Social Security replaced 41.2 percent of the preretirement salary of an average worker turning 65 in 2000. In 2030, the program will substitute only 36.5 percent for a 65-year-old.

With less help from Social Security, young workers will have to turn to other resources, like personal savings, to fund retirement.

Saving for retirement can be difficult in your 20s and 30s, when you're getting on your feet. But putting even something away now can make a big difference to your long-term financial security.

"At that age, you have time to make an adjustment for those reduced benefits," said Chris Long, a financial planner in Chicago.

If you're in your 40s, assume you'll get at least half of your stated Social Security benefit, Long said. If you're in your 50s, estimate that you'll get 75 percent. If you're younger, make no assumptions.

"Whatever you do get in retirement, we consider it a bonus," Long said.

http://www.chicagotribune.com/busine...,1304068.story

Originally Posted by Thunderhorse

Millions face shrinking Social Security payments

By STEPHEN OHLEMACHER, Associated Press Writer

http://news.yahoo.com/s/ap/20090823/...smaller_checks

WASHINGTON – Millions of older people face shrinking Social Security checks next year, the first time in a generation that payments would not rise. The trustees who oversee Social Security are projecting there won't be a cost of living adjustment (COLA) for the next two years. That hasn't happened since automatic increases were adopted in 1975.

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Yes, but they did get a 5.8% increase this past year, because of the rise in cost of energy (OIL) skewed the data last time around.

It may take 2 years for inflation to catch up.

Originally Posted by James48843

Yes, but they did get a 5.8% increase this past year, because of the rise in cost of energy (OIL) skewed the data last time around.

It may take 2 years for inflation to catch up.

And here is really why...Cost of living adjustments are pegged to inflation, which has been negative this year, largely because energy prices are below 2008 levels.

Millions face shrinking Social Security payments

http://news.yahoo.com/s/ap/20090823/...smaller_checks