2/8/2011 5:00 PM ET|
5 big money worries for retirees
Taxes, Medicare and Social Security are among the unresolved financial issues facing retirees planning for their golden years.
As 2011 begins, people in or nearing retirement face a particularly uncertain financial future. The government last December approved a package of tax breaks, jobless benefits and other stimulus spending. But these fixes will last only a year or two and virtually guarantee big shifts down the road. Meanwhile, the landmark health reform law will be under sustained legal attacks for years, adding to already existing questions about the effects of its implementation. Deficit reduction efforts appear unavoidable, if unpleasant. And the economic recovery continues its painfully slow progress.
No wonder retirement-age people keep working or are trying to get back into the work force. They're also continuing to reduce their use of credit and tighten up on spending. People are playing defense -- cutting spending a bit now to reduce the odds of having to live even more frugally in the future.
Looking ahead, here are five major unresolved money issues that are crucial to retirees:
Current tax rates will be extended until the end of 2012, but then all bets are off. Deficit reduction proposals suggest two possibilities. If Congress can agree to sharply reduce or eliminate more than $1 trillion in current tax breaks, it would be possible to simplify and lower personal income tax rates and still reduce the deficit. If such agreement cannot be fashioned, personal income tax rates would need to be increased.
Under health reform, projected increases in Medicare spending would be trimmed by some $500 billion in the coming decade. A good portion of that savings will come from lower federal subsidies to insurers who sell Medicare Advantage plans that supplement basic Medicare. This shift is already being felt -- insurers have cut back on their offerings and some are reducing covered benefits. But the major deficit reduction plans so far proposed would make further Medicare cuts.
On the plus side, health reform will begin next year to provide an expanded list of free preventive wellness exams and tests. Brand-name prescription drug expenses will also be reduced for many Medicare recipients. But while a healthier group of retirees eventually would reduce financial pressures on Medicare, it's not likely that such gains will appear soon enough to forestall higher Medicare insurance costs to retirees.
The stimulus package provides a one-year tax holiday that will cut the employee portion of Social Security taxes by two percentage points. This would cost the government $110 billion to $120 billion. This cut does not affect Social Security benefits, but it will increase pressure to make Social Security cuts part of a long-term deficit reduction program.
VIDEO ON MSN MONEY
Inflation is with us but the government does not recognize it by leaving out food and utilities and the increased taxes, known as fees on utility bills.
Then there is the fact that a quart and a half of ice cream is the same price as a half gallon used to be. There are countless items that are short sized with full sized prices and that is not counted as inflation.
Hungry, ill seniors with nothing to lose would not be a good omen for a politician's future.
It's going to catch up to us - especially those of us who have supplemental insurance. When I turn 65 in 5 years, I have to sign up for Medicare B and my retirement pension's BCBS will become my Medicare supplemental and prescription plans. Right now, the premiums I'd pay cost a little more than Medicare B, but I'm planning for the likelihood they'll cost twice as much as B in 5 years and B will take a larger % of my SS check than it would at current rates. Many of those without a good nest egg or cushion in their retirement incomes who live comfortably now are going to be reduced to paupers by the middle of this decade.
The problem with Obamacare is that it was passed by sacrificing controls on price escalation - the thing that needed the most attention. For example, Obama made a deal with Big Pharma's top lobbyist Billy Tauzin to not go after the fact Big Pharma charges Americans 50% more than ANY other nation for the same meds, in return for Big Pharma supporting Obamacare and not ordering puppets like John Kerry to vote against it.
Get your facts straight, 85% of Americans do have health insurance. Sure, divide the country and I won't have to support a bunch of deadbeats!!!!!
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