Will those benefits still be there when you retire?

Maurie Backman
Oct 26, 2017

Social Security serves as a financial lifeline for millions of retired seniors. But most of today’s workers are doubtful those benefits will be around once it’s their time to retire.

In a newly released Northwestern Mutual study, only 20% of Americans think it’s extremely likely that Social Security will be around in the future. This means that the overwhelming majority of workers have their doubts about the program’s long-term viability. The question is: Are they right?
Social Security is facing challenges

Though Social Security isn’t currently in danger, its future is somewhat dubious. That’s because come 2034, the program’s trust funds are expected to run dry, and once they do, Social Security’s incoming tax revenue won’t suffice in keeping up with scheduled benefits. This means that future beneficiaries can anticipate major cuts if Congress doesn’t intervene with a viable fix — something it’s failed at to date.

Now the extent to which future benefits are slashed under this sort of scenario are up for debate. Currently, the projection sits around 23%, which means future beneficiaries might only collect 77% of what they’d otherwise be entitled to. And given the number of seniors who rely on those benefits in the absence of independent savings, that’s definitely not a good thing.

On the other hand, we can choose to look at this from a positive angle. As of today, Social Security’s anticipated worst-case scenario is nothing more than a 23% reduction in benefits, which means future recipients will still collect the bulk of what they’re eligible for. So while it’s understandable for the public to have its doubts about Social Security, those who are ready to give up on it may, in fact, be jumping the gun.

Then again, forgetting about Social Security isn’t such a bad thing, either. And if more people do it, they might actually take steps to save for the future, which is something we all need to be doing in the first place, regardless of whether those benefits actually come through for us.
Take control of your retirement

If you’re among the bulk of Americans who are ready to write off Social Security, here’s some reassuring news: Those benefits were never designed to fully cover your senior living costs in the first place. Rather, Social Security currently replaces about 40% of the average worker’s preretirement income. Most folks, however, need double that amount, if not more, to pay the bills during their golden years. That’s why saving independently is crucial — regardless of what the future has in store for Social Security.

Here’s some more good news: You don’t need to set aside a huge chunk of your paychecks to attain some financial security down the line. If you start putting money away early enough in your career, you can turn a series of relatively small contributions into a sizable nest egg over time.

You can’t help but notice the difference between kick-starting your savings efforts at 25 or 30 versus doing so 10 or 20 years later. Furthermore, the above table assumes a fairly modest monthly contribution of $200 — not a life-changing amount. But if you’re willing to save more, you’ll end up with more. It’s that simple.

Of course, the longer you delay your savings efforts, the less you stand to gain from investing. In our example, saving $200 a month starting at age 25 means forking over a total of $96,000 in out-of-pocket contributions. Yet over 40 years, that amount has the potential to grow into $622,000 if we apply an average yearly 8% return on investment, which is more than feasible with a stock-heavy portfolio.

Of course, if you’ve already been working for many years and have yet to start building a nest egg, which is the case for numerous Americans, then you’ll obviously be looking at a narrower savings window, in which case you’ll need to ramp up your contributions going forward to make up for lost time. But even so, you still have a pretty decent opportunity to establish some level of savings, which is critical regardless of Social Security’s ultimate fate.

We don’t know what the future holds for Social Security. Maybe we’ll collect most of our benefits, or maybe they’ll face further cuts as things evolve. But one thing’s for sure: Independent savings are a must no matter what happens to Social Security, and the sooner more people accept that, the better off they’ll be down the line.

A U.S. district court dismisses a lawsuit by a Kentucky nursing home to obtain retroactive Medicaid benefits for a deceased resident because the nursing home does not have standing to pursue a claim on behalf of the resident’s estate. Diversicare v. Glisson (U.S. Dist. Ct., E.D. Ky., No. 16-141-HRW, October 27, 2017).

Wilma Fryer entered a nursing home, and the nursing home applied for Medicaid benefits on her behalf. The application was still pending when Ms. Fryer died. The state eventually denied the application due to missing information about Ms. Fryer’s finances.

At the hearing, the nursing home produced the previously missing information, but the state denied the application because the information was not produced before the application was processed. The nursing home filed a claim in federal court, arguing that the state wrongfully denied Ms. Fryer benefits.

The U.S. District Court, Eastern District of Kentucky, dismisses the claim, holding that the nursing home does not have standing to sue on Ms. Fryer’s behalf. The court notes that the nursing home is not the administrator of Ms. Fryer’s estate. According to the court, the nursing home “is, at best, a creditor” and there “are no Kentucky statutes that allow a creditor of an estate to sue directly on behalf of a deceased debtor.”

Seniors tighten their belts in retirement, and that may not always be a good thing.

Most seniors aren’t living large in retirement. However, that’s not necessarily because they lack the money to do so.

“Those who have higher incomes are generally living too frugally,” says Matt Fellowes, founder and CEO of United Income. Seniors trim an average of 2.5 percent off their spending each year, according to a white paper he drafted examining data from the government and University of Michigan. Meanwhile, estate values grew 130 percent between 2000-2002 and 2010-2012.

While it may seem as though there can be no harm in living frugally, Fellowes and other finance experts say both seniors and the economy can suffer when spending declines.

Shift of income in retirement. For workers who have earned a paycheck for decades, the shift to using income from retirement accounts can be difficult. “When people start paying themselves, they get scared,” says Dolph Janis, founder and owner of Clear Income Strategies Group in Charlotte, North Carolina.

After spending a lifetime saving money, it can feel unsettling to begin pulling cash from accounts that were previously off-limits. “It’s a psychological issue,” says Nancy Skeans, CEO of Schneider Downs Wealth Management Advisors in Pittsburgh. It’s something even her more affluent clients experience. “They are really apprehensive about spending $30,000 or $40,000 for a new car,” she says, even when they can clearly afford it.

Health care, economic concerns stifle spending. Health care costs and the economy also rank high as motivation to cut spending. In particular, today’s longer lifespans breed uncertainty about if and when retirement money will run out.

“The good news is you get to live a long life,” says Stephen Daney, investment advisor at Better Money Decisions and founder of The Life Money Center in Albuquerque, New Mexico. “The bad news is that you may have only planned for [age] 75 or 80.”

Skeans says her clients are particularly concerned with how to pay for health care. “[They worry] about the unknown cost of what it’s going to cost to take care of me when I’m 85 years old,” she says. Some people are also concerned about market fluctuations and worry about a future recession wiping out savings. “People continue to refer back to 2008,” Skeans says. “What if it happens again?”

Television might be partly to blame. The Bureau of Labor Statistics reports seniors watch significantly more television than younger age groups. While people 35 to 44 years old watched an average of two hours of TV programming each day in 2016, the number jumps to four hours for those 65 to 74 years old. “As people follow news more closely, they may become more susceptible to a negative viewpoint,” Fellowes says. News tends to sensationalize changes in the market, which can result in people holding on to their money too tightly.

Dangers of extreme frugality. Being frugal may seem like a virtue, but it doesn’t come without faults. The most obvious problem is that it’s difficult for seniors to enjoy retirement if they refuse to spend any of their money. “If you become obsessed with penny-pinching, that’s a problem,” Daney says.

Fellowes says the problems go deeper than that. According to his research, seniors may delay preventive care or withdraw from social activities in order to save money. Both can have a negative effect on senior health and well-being.

There is also a larger economic issue at play. In 2012, consumer insights firm Nielsen predicted baby boomers would hold 70 percent of disposable income in the U.S. by 2017. “You have this population that has stockpiled assets and isn’t putting [them] back into the economy,” Fellowes says. Although hard to quantify, that could have an economic effect at the national level.

How to find the proper balance. Janis says there is a relatively simple way for seniors to avoid hoarding money they could be spending to enjoy their retirement years. “Too many people are worried about how much money they have and not enough about how much income they have coming in,” he says.

Instead of lumping all retirement funds into one bucket, Janis divides them into guaranteed and non-guaranteed sources of income. Periodic payments from Social Security, traditional pension plans and annuities can all be considered guaranteed, and seniors should be sure their fixed expenses can be covered by these sources.

“When I’m doing a [financial] plan, Social Security should take care of medical needs and living expenses,” Janis says, assuming his client doesn’t have an annuity or pension. “It shouldn’t cover your lifestyle.” Lifestyle expenses such as travel and dining can be taken out of 401(k)s, IRAs or other savings.

Being too frugal in retirement doesn’t seem like the worst problem to have, but there is no reason to hold onto your cash when you could be using it to enjoy your golden years more fully.

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How to find the proper balance. Janis says there is a relatively simple way for seniors to avoid hoarding money they could be spending to enjoy their retirement years. “Too many people are worried about how much money they have and not enough about how much income they have coming in,” he says.

Instead of lumping all retirement funds into one bucket, Janis divides them into guaranteed and non-guaranteed sources of income. Periodic payments from Social Security, traditional pension plans and annuities can all be considered guaranteed, and seniors should be sure their fixed expenses can be covered by these sources.

“When I’m doing a [financial] plan, Social Security should take care of medical needs and living expenses,” Janis says, assuming his client doesn’t have an annuity or pension. “It shouldn’t cover your lifestyle.” Lifestyle expenses such as travel and dining can be taken out of 401(k)s, IRAs or other savings.

Being too frugal in retirement doesn’t seem like the worst problem to have, but there is no reason to hold onto your cash when you could be using it to enjoy your golden years more fully.

By: Maryalene LaPonsie – USNews.com

WASHINGTON (Reuters) – The largest U.S. veterans service organization on Thursday urged President Donald Trump to veto recent legislation allowing financial companies to block customers from banding together to sue, saying it would hurt members of the armed forces.

The American Legion, which rarely speaks out on bank policy or politics, said in a statement it would “not be silent while banks and payday loan shops rip off servicemembers and veterans”. But it will likely have a hard time convincing Trump to veto the resolution to roll back the Obama-era policy.

The Consumer Financial Protection Bureau, an independent federal regulator, finalized a rule this summer that barred banks, credit card issuers and other financial companies from requiring customers to agree not to join group lawsuits and only take any potential disputes to closed-door arbitration.

In a vote of 51 to 50, the Senate on Tuesday passed a resolution killing the rule and prohibiting regulators from enacting a similar one in the future. The House of Representatives approved the resolution earlier, and now all that is needed to erase the rule is for Trump to sign it into law.

”Our membership has stated unequivocally that we are opposed to situations where our military and veterans’ financial protections are chipped away to increase the profits of the big banks,” said American Legion National Commander Denise Rohan. “Repealing the CFPB arbitration rule takes away consumers’ most effective tool to protect themselves against predatory lenders.”

Servicemembers can struggle to sue companies individually because they cannot afford legal costs, move frequently for work, or are deployed overseas, the Legion said.

In class actions, individuals with the same complaint band together to lower lawsuit costs.

Many veteran organizations tried for months to stop the Republican-led Congress from passing the resolution, and other advocacy groups have also pressed for a veto.

That is a long-shot.

The White House issued a statement shortly after Tuesday’s vote applauding the resolution, saying the CFPB rule would have given consumers “fewer options for quickly and efficiently resolving financial disputes” and opened “the door to frivolous lawsuits by special interest trial lawyers.”

The rule’s supporters say arbitration is rigged against consumers because it is secretive, does not set legal precedent, and is controlled by the companies. They also say the right to sue is enshrined in the U.S. Constitution.

Reporting by Lisa Lambert; Editing by Andrew Hay

On February 16, 2017, the Jimmo v. Sebelius court approved a Corrective Statement to be used by the Centers for Medicare and Medicaid Services (CMS) to affirmatively disavow the use of an “Improvement Standard” for Medicare coverage. The government will use the statement as part of its Corrective Action Plan, which was ordered by the Court last month to remedy noncompliance with the Jimmo Settlement.

The court-approved CMS Corrective Statement follows:

The Centers for Medicare & Medicaid Services (CMS) reminds the Medicare community of the Jimmo Settlement Agreement (January 2014), which clarified that the Medicare program covers skilled nursing care and skilled therapy services under Medicare’s skilled nursing facility, home health, and outpatient therapy benefits when a beneficiary needs skilled care in order to maintain function or to prevent or slow decline or deterioration (provided all other coverage criteria are met). Specifically, the Jimmo Settlement required manual revisions to restate a “maintenance coverage standard” for both skilled nursing and therapy services under these benefits:

Skilled nursing services would be covered where such skilled nursing services are necessary to maintain the patient’s current condition or prevent or slow further deterioration so long as the beneficiary requires skilled care for the services to be safely and effectively provided.

Skilled therapy services are covered when an individualized assessment of the patient’s clinical condition demonstrates that the specialized judgment, knowledge, and skills of a qualified therapist (“skilled care”) are necessary for the performance of a safe and effective maintenance program. Such a maintenance program to maintain the patient’s current condition or to prevent or slow further deterioration is covered so long as the beneficiary requires skilled care for the safe and effective performance of the program.

The Jimmo Settlement may reflect a change in practice for those providers, adjudicators, and contractors who may have erroneously believed that the Medicare program covers nursing and therapy services under these benefits only when a beneficiary is expected to improve. The Settlement is consistent with the Medicare program’s regulations governing maintenance nursing and therapy in skilled nursing facilities, home health services, and outpatient therapy (physical, occupational, and speech) and nursing and therapy in inpatient rehabilitation hospitals for beneficiaries who need the level of care that such hospitals provide.

Attorneys for the Jimmo plaintiffs are pleased that the statement emphasizes the availability of coverage for maintenance nursing and therapy when it is skilled. Many older adults and people with disabilities require skilled therapy or nursing to maintain current functioning or prevent deterioration. This is particularly true for people with chronic and progressive conditions, such as Parkinson’s disease, multiple sclerosis, or ALS. Medicare beneficiaries and their advocates should point to the CMS Corrective Statement if confusion about the Improvement Standard among medical providers or Medicare decision-makers persists.

“The CMS Corrective Statement is intended to make it absolutely clear that Medicare coverage can be available for skilled therapy and nursing that is needed to maintain an individual’s condition or slow deterioration,” says Judith Stein, Executive Director of the Center for Medicare Advocacy and a counsel for the plaintiffs. “We are hopeful this will truly advance access to Medicare and necessary care for people with long-term and debilitating conditions.”

CMS will be publishing the Corrective Statement on a new webpage dedicated to Jimmo. The webpage will also include Frequently Asked Questions and Jimmo-related documents and resources. The Corrective Action Plan also includes additional training for Medicare contractors and adjudicators. The Plan must be fully implemented by September 4, 2017.

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The Center for Medicare Advocacy, Inc., established in 1986, is a national nonprofit, nonpartisan law organization that provides education, advocacy and legal assistance to help older people and people with disabilities obtain fair access to Medicare and quality health care. The Center is headquartered in Connecticut and Washington, DC with offices throughout the country.

Vermont Legal Aid is a non-profit law firm established in 1968 to provide civil legal services for those living in poverty, with a disability, or over age 60. We also serve anyone who is discriminated against in housing decisions and all who face challenges related to health care insurance or services.