1. The Huge Government Debt
It may come as no surprise that government debt is out of control. In early 2016 the US National Debt topped $19 Trillion. That’s Trillion with a “T”!
For 2016 the US Government is expected to spend $600 Billion more than it will collect in tax revenues adding to the debt even more.
Most importantly is the fact that nearly half of all government spending is on Social Security and Medicare payments. $1.4 Trillion for 2016!
According to a recent Barron’s article, titled The Case for 100-Year Bonds;
If the government added no new spending programs and had no tax cuts, the rising cost of government programs like Social Security and Medicare, could potentially push that budget debt up to as much as $45 trillion by 2020!
2. Rising Healthcare Costs And Longevity
As we get older the cost to keep us healthy goes up exponentially. According to The Kaiser Family Foundation the average 65 year old costs Medicare $5,562, while the average 80 year old costs nearly double that at $11,618. For those that live to age 95 the cost to Medicare is $16,145!
Due primarily to increased longevity of the baby boom generation, The Kaiser Family Foundation calculates that the number of Medicare beneficiaries age 80 or above will increase from 11.3 million in 2010 to 30.9 million in 2050.
3. They Already Are
Over the past 30 years, Social Security Benefits have averaged a 2.8% annual cost of living adjustment (COLA), while at the same time Medicare Part B premiums have increased at a rate of 7.1%.
Most of us know that Social Security has been making changes to the benefits.
- They have raised the Full Retirement Age from 65 to 67 for younger workers.
- In 2016 they made significant changes to essentially eliminate to popular collecting strategies. The file and suspend and the restricted application.
Medicare benefits have also been getting more expensive
Basically 3 things are changing for Medicare recipients.
- Many participants are now paying higher out of pocket expenses like co-pays, prescriptions, dental and vision.
- Premiums are increasing for many. Just looking at Medicare Part B, for those in the lowest bracket, Premiums have gone from $104.90 per individual in 2015, to $121.80 in 2016 to $134 for 2017. Those are huge increases!
- The brackets for determining Medicare Part B Premiums have shifted. This will show up for some when they see their Medicare Premiums for 2018. Essentially the table for determining premiums has shifted to where higher premiums kick in at lower levels of income for some people.
The Hold Harmless Rule
Some of you may be saying, “Hey, I didn’t think my premium went up.”
That’s because the government has what is known as a “hold harmless rule.”
The rule says, that the increase in Medicare premiums can not cause your Social Security check to go down. Because Social Security had no COLA for 2016 and only a .3% increase for 2017, most people who are already on Medicare, wouldn’t see the full impact of the Medicare increase. What could likely happen if this continues, is that any increases in Social Security might be eaten up by the increase in Medicare premiums.
I have been interested in business and the stock market ever since I can remember. In my teens, I devoured any book I could get my hands on about the markets, economics or business. I even had my own subscription to the Wall Street Journal.
For over 20 years I have worked with clients one on one, helping them plan for and realize their retirement dreams.