Some Cures For Your “Social InSecurity”

July 27, 2022 — Sam H. Fawaz

One of the most common questions I hear from clients and prospects concerns the viability of the social security system and the likelihood it will be solvent enough to pay their benefits when they eventually reach retirement age. Their default instinct is to draw social security at the earliest possible age in case benefits were to run out prematurely. As you’ll read below, the Social Security program has many possible tweaks to help extend the payment of benefits for many decades to come and should help alleviate much of your Social InSecurity.

With approximately 94% of American workers covered by Social Security and 65 million people currently receiving benefits, keeping Social Security healthy is a major concern. According to the Social Security Administration, Social Security isn’t in danger of going broke — it’s financed primarily through payroll taxes — but its financial health is declining, and future benefits may eventually be reduced unless Congress acts.

Each year, the Trustees of the Social Security Trust Funds release a detailed report to Congress that assesses the financial health and outlook of this program. The most recent report, released on June 2, 2022, shows that the effects of the pandemic were not as significant as projected in last year’s report — a bit of good news this year.

Overall, the news is mixed for Social Security

The Social Security program consists of two programs, each with its own financial account (trust fund) that holds the payroll taxes that are collected to pay Social Security benefits. Retired workers, their families, and survivors of workers receive monthly benefits under the Old-Age and Survivors Insurance (OASI) program; disabled workers and their families receive monthly benefits under the Disability     Insurance (DI) program. Other income (reimbursements from the General Fund of the U.S. Treasury and income tax revenue from benefit taxation) is also deposited in these accounts.

Money that’s not needed in the current year to pay benefits and administrative costs is invested (by law) in special government-guaranteed Treasury bonds that earn interest. Over time, the Social Security Trust Funds have built up reserves that can be used to cover benefit obligations if payroll tax income is insufficient to pay full benefits, and these reserves are now being drawn down. Due to the aging population and other demographic factors, contributions from workers are no longer enough to fund current benefits.

In the latest report, the Trustees estimate that Social Security will have funds to pay full retirement and survivor benefits until 2034, one year later than in last year’s report. At that point, reserves will be used up, and payroll tax revenue alone would be enough to pay only 77% of scheduled OASI benefits, declining to 72% through 2096, the end of the 75-year, long-range projection period.

The Disability Insurance Trust Fund is projected to be much healthier over the long term than last year’s report predicted. The Trustees now estimate that it will be able to pay full benefits through the end of 2096. Last year’s report projected that it would be able to pay scheduled benefits only until 2057. Applications for disability benefits have been declining substantially since 2010, and the number of workers receiving disability benefits has been falling since 2014, a trend that continues to affect the long-term outlook.

According to the Trustees report, the combined reserves (OASDI) will be able to pay scheduled benefits until 2035, one year later than in last year’s report. After that, payroll tax revenue alone should be sufficient to pay 80% of scheduled benefits, declining to 74% by 2096. OASDI projections are hypothetical, because the OASI and DI Trust Funds are separate, and generally one program’s taxes and     reserves cannot be used to fund the other program. However, this could be changed by Congress, and combining these trust funds in the report is a way to illustrate the financial outlook for Social Security as a whole.

All projections are based on current conditions and best estimates of likely future demographic, economic, and program-specific conditions, and the Trustees acknowledge that the course of the pandemic and future events may affect Social Security’s financial status.

You can view a copy of the 2022 Trustees report at ssa.gov.

Many options for improving the health of Social Security

The last 10 Trustees Reports have projected that the combined OASDI reserves will become depleted between 2033 and 2035. The Trustees continue to urge Congress to address the financial challenges facing these programs so that solutions will be less drastic and may be implemented gradually, lessening the impact on the public. Many options have been proposed, including the ones listed below. Combining some of these may help soften the impact of any one solution:

  • Raising the current Social Security payroll tax rate (currently 12.4%). Half is currently paid by the employee and half by the employer (self-employed individuals pay the full 12.4%). An immediate and permanent payroll tax increase of 3.24 percentage points to 15.64% would be needed to cover the long-range revenue shortfall.
  • Raising or eliminating the ceiling on wages subject to Social Security payroll taxes ($147,000 in 2022).
  • Raising the full retirement age beyond the currently scheduled age of 67 (for anyone born in 1960 or later).
  • Raising the early retirement age beyond the current age of 62.
  • Reducing future benefits. To address the long-term revenue shortfall, scheduled benefits would have to be immediately and permanently reduced by about 20.3% for all current and future beneficiaries, or by about 24.1% if reductions were applied only to those who initially become eligible for benefits in 2022 or later.
  • Changing the benefit formula that is used to calculate benefits.
  • Calculating the annual cost-of-living adjustment (COLA) for benefits differently.

A comprehensive list of potential solutions can be found at ssa.gov.

As for when Congress will act to fix the system, in my opinion, it will probably be at the last minute when it becomes a crisis. But make no mistake-Congress will act, and any rumors or stories that social security won’t be around for the long term are simply false. Any member of Congress who votes against fixing and extending the system’s heath won’t be re-elected, and therefore you know they eventually will.

As for when you should consider drawing your own social security benefits, the unsatisfying answer is: it depends. Whether you should draw benefits at your early retirement age (usually 62), full retirement age (usually 67) or latest retirement age (70), depends on your financial situation, your spending needs, expected longevity and other factors. Only working with a financial planner or a comprehensive social security optimizer can help you figure out the optimal timeframe to claim social security. The right or wrong decision can increase or decrease your lifetime benefits by five or six zeroes—it’s worth the time and effort to do the analysis. We can, of course, help.

If you would like to review your current investment portfolio or discuss your social security benefits, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fee-only fiduciary financial planning firm that always puts your interests first.  If you are not a client yet, an initial consultation is complimentary and there is never any pressure or hidden sales pitch. We start with a specific assessment of your personal situation. There is no rush and no cookie-cutter approach. Each client is different, and so is your financial plan and investment objectives.

Posted in Elder Care, estate planning, Financial Planning, General, retirement, retirement planning, Social Security Benefits. Leave a Comment »

Medicare Open Enrollment Begins October 15

September 27, 2020 — Sam H. Fawaz

What is the Medicare Open Enrollment Period?

The Medicare Open Enrollment Period is the time during which Medicare beneficiaries can make new choices and pick plans that work best for them. Each year, Medicare plan costs and coverage typically change. In addition, your health-care needs may have changed over the past year. The open enrollment period is your opportunity to switch Medicare health and prescription drug plans to better suit your needs.

When does the Medicare Open Enrollment Period start?

The annual Medicare Open Enrollment Period begins on October 15 and runs through December 7. Any changes made during open enrollment are effective as of January 1, 2020.

During the open enrollment period, you can:

  • Join a Medicare prescription drug (Part D) plan
  • Switch from one Part D plan to another Part D plan
  • Drop your Part D coverage altogether
  • Switch from Original Medicare to a Medicare Advantage plan
  • Switch from a Medicare Advantage plan to Original Medicare
  • Change from one Medicare Advantage plan to a different Medicare Advantage plan
  • Change from a Medicare Advantage plan that offers prescription drug coverage to a Medicare Advantage plan that doesn’t offer prescription drug coverage
  • Switch from a Medicare Advantage plan that doesn’t offer prescription drug coverage to a Medicare Advantage plan that does offer prescription drug coverage

What should you do?

Now is a good time to review your current Medicare plan. What worked for you last year may not work for you this year.

Have you been satisfied with the coverage and level of care you’re receiving with your current plan? Are your premium costs or out-of-pocket expenses too high? Has your health changed?  Do you anticipate needing medical care or treatment, or new or pricier prescription drugs?

If your current plan doesn’t meet your health-care needs or fit within your budget, you can switch to a plan that may work better for you.

If you find that you’re still satisfied with your current Medicare plan and it’s still being offered, you don’t have to do anything. The coverage you have will continue.

What’s new for 2020?

The end of the Medicare Part D donut hole. The Medicare Part D coverage gap or  “donut hole” will officially close in 2020. If you have a Medicare Part D prescription drug plan, you will now pay no more than 25% of the cost of both covered brand-name and generic prescription drugs after you’ve met your plan’s deductible (if any), until you reach the out-of-pocket spending limit.

New Medicare Advantage features. Beginning in 2020, Medicare Advantage (Part C) plans will have the option of offering nontraditional services such as transportation to a doctor’s office, home safety improvements, or nutritionist services. Of course, not all plans will offer these types of services.

Two Medigap  plans discontinued. If you’re covered by Original Medicare (Part A and Part B), you may have purchased a private supplemental Medigap policy to cover some of the costs that Original Medicare doesn’t cover. In most states, there are 10 standard types of Medigap policies, identified by letters A through D, F, G, and K through N. Starting in 2020, people who are newly eligible for Medicare will not be able to purchase Medigap Plans C and F (these plans cover the Part B deductible which is no longer allowed), but if you already have one of those plans you can keep it.

If you would like to review your current investment portfolio or discuss any medicare or health insurance questions, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fee-only fiduciary financial planning firm that always puts your interests first.  If you are not a client yet, an initial consultation is complimentary and there is never any pressure or hidden sales pitch. We start with a specific assessment of your personal situation. There is no rush and no cookie-cutter approach. Each client is different, and so is your financial plan and investment objectives.

Posted in Elder Care, Financial Planning, General, Healthcare Planning, retirement planning. Tags: . Leave a Comment »

Nine Top Elder Frauds to Avoid

October 31, 2019 — Sam H. Fawaz

One of the areas that regulators have begun to focus on in the investment industry is elder fraud. After hearing about the vicious scams endured by senior citizens, many by their own families, I’ve become more attuned to the clues that a client or relative of mine might be a victim of.

It happens too often: you’ve saved money all your life. Or, maybe you sold your business after investing years of hard work. You’ve chosen the smart path and have a comfortable nest egg as you set sail into retirement. Still, you always have to be on guard! Criminals seek to trick you into willingly handing over your hard-earned savings.

Elder financial exploitation quadrupled from 2013 to 2017, according to the Consumer Financial Protection Bureau. Specifically, these activities originated from unknown scammers, family members, caregivers, or someone in a nursing home. They involved more than $6 billion, with an average loss of $34,200. But in 7% of these instances, losses exceeded $100,000.

In 2017, elder financial exploitation reports totaled 63,500. Sadly, these reports probably represent just a small fraction of actual incidents. According to the FBI, more than 2 million seniors were victimized in the past year. Even former FBI Director William Webster, 95, was targeted in 2014.

Webster was promised $72 million and a new car…if he paid several thousand dollars to cover shipping. Ultimately, the caller was arrested. But not before his relatives in Jamaica had successfully scammed other U.S. citizens out of hundreds of thousands of dollars.

It won’t happen to me

If you’re thinking, “This can’t happen to me,” think again. The best and brightest can fall victim to a seasoned swindler.

While scams are only limited by the criminal imagination, the U.S. Senate’s Committee on Aging highlighted some of the more common scams in a report entitled “Protecting Older Americans Against Fraud“.

Listed below are the top nine scams. Please familiarize yourself with this list. If you have any questions, we would be happy to talk to you.

  1. IRS impersonation scams

Scammers impersonating IRS officials claim you owe money and pressure you to settle immediately. If victims make an initial payment, they will often be told that new discrepancies have been found in their tax records, which must be satisfied with another payment.

Don’t fall victim! The IRS will never call you to demand immediate payment. If there is a question about your return, you’ll receive a letter in the mail, not an e-mail, and there is a process to appeal any disputed amount. 

  1. Robocalls and unsolicited phone calls

Robo-dialers can be used to distribute prerecorded messages or connect the person who answers the call with a live person. IRS scammers may use this tactic.

Robocalls often originate overseas, and numbers are usually spoofed (fake) to hide their true identity. Have you recently received a call from someone whose phone number has your prefix? If you don’t recognize the number, it’s likely spoofed and not local.

The FTC has warned not to give out personal information in response to an incoming call. Identity thieves are clever. They often pose as bank representatives, credit card companies, creditors, or government agencies. They hope to convince victims to reveal their account numbers, Social Security numbers, mothers’ maiden names, passwords, and other identifying information. Sometimes all they’re looking for is to record and “steal” your voice imprint, so let them do the talking. Don’t answer any questions with “yes” or “no”, or even give out your name (see 4. below).

Unsure who you are talking to? Just hang up the phone.

  1. Sweepstakes scams / Jamaican lottery scam

Sweepstakes scams continue to claim senior victims who believe they have won a lottery and need only take a few actions, i.e., sending cash to the con artists in order to obtain their “winnings.”

Sometimes, it’s best not to answer a call if you don’t recognize the number. If it’s a friend, neighbor, relative or colleague, they’ll leave a voicemail message.

  1. “Can you hear me?” “Are you there?” scams

The goal: get your voice print saying, “Yes.” Then, the scammer charges your credit card using your “Yes.”

If asked, don’t respond. Just hang up. If you get a call, don’t press 1 to speak to a live operator to be removed from the list. If you respond in any way, it will likely lead to more robocalls–and more scams.

  1. Grandparent scams

“Hi Grandma/Grandpa, guess who?” When you respond, “This sounds like ‘Sally’,” the fraudster will say “she’s” in trouble and needs money to help with an emergency, such as getting out of jail or paying a hospital bill.

If you send cash, expect “her” to call you again, asking for more cash. Victims who were duped later said they had wished they had asked some simple questions that only their true grandchild would know how to answer. Have discussions with your loved ones about what safe word or phrase you might share if they’re really in trouble and need help.

  1. Computer tech support scam

Whether a computer pop-up screen or an alleged caller from Microsoft, scammers claim your PC is infected with a virus. Please note, Microsoft will never call you to inform you they have detected a virus.

Do not give control of your computer to a third party that calls you out of the blue. Don’t give them your credit card number.

  1. Romance scams

More and more Americans are taking to the Internet to find a partner. While some find love, others find financial heartache.

Be wary of individuals who claim the romance was destiny or fate. Be cautious if an individual declares his or her love but needs money from you to fund a visit. Or claims cash is unexpectedly needed to cover an emergency. These are huge red flags.

  1. Identity theft

This was the most common type of consumer complaint in 2016, with nearly 400,000 complaints.

Placing a freeze with the major credit bureaus helps prevent credit cards or loans from being taken out in your name. If you believe you are a victim, call the companies where the fraud occurred, place a fraud alert with the credit bureaus, and file a report with your local police department.

  1. Government grant scams

In the most common variation of this scam, consumers receive an unsolicited phone call from a con artist claiming he or she is from the “Federal Grants Administration,” or the “Federal Grants Department”–agencies that do not exist. Always remember, grants are made for specific purposes, not because you are a good taxpayer.

Do not wire funds to cover fees for the so-called grant.  Government grants never require fees of any kind. If you do, you’ll likely get more requests for additional unforeseen “fees.” If getting a sum of money to someone involves using pay services such as Western Union or going to say Walmart to transmit money, be immediately suspicious.

And, don’t give out bank information or personal information to these swindlers. Scammers pressure people to divulge their bank account information so that they can steal the money in their account. You wouldn’t give bank information to a stranger at the supermarket. You don’t know them. So, why give personal information to someone you don’t know who unexpectedly contacted you?

Always remember, you are in control. When in doubt, hang up. That is how you protect yourself.

If you suspect elder financial abuse, the American Bankers Association suggests the following steps:

  • Talk to elderly friends or loved ones. Try to determine what may be happening to their financial situation, such as a new person “helping” them with money management, or a relative using cards or credit without their permission.
  • Report the elder financial abuse to their bank. Enlist their banker’s help to stop it and prevent its recurrence.
  • Contact Adult Protective Services in your town or state for help. Report all instances of elder financial abuse to your local police—if fraud is involved, they should investigate.

Be on alert

At the end of this article, there is a list of useful tips that you can print. Place it near your phone. These cards can be a useful tool to help protect you against swindlers.

Final thoughts

Our mission is to help you reach your financial goals. We are proactive in our recommendations. But sometimes, a good defense is the best offense. It’s heartbreaking to hear stories of theft. We don’t want you to become a victim and another government statistic.

If you would like to review your current investment portfolio or discuss any other financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fee-only fiduciary financial planning firm that always puts your interests first.  If you are not a client yet, an initial consultation is complimentary and there is never any pressure or hidden sales pitch. We start with a specific assessment of your personal situation. There is no rush and no cookie-cutter approach. Each client is different, and so is your financial plan and investment objectives.

Tips to Avoid Scams 2019-10-31

 

Posted in Elder Care, Financial Planning, General, retirement planning. Leave a Comment »
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