Rescuing America’s Safety Net
A March 2023 survey found that more than 90% of Americans worry about the Social Security program, and about half of those said they worry a great deal.1 A separate survey the same month found that more than 80% of Americans worry Medicare will not be able to provide the same level of benefits in the future.2
These concerns are well-founded, because both programs — the cornerstones of “America’s Safety Net” — face serious fiscal challenges that require Congressional action. And the longer Congress waits to act, the more extreme the solutions will have to be. Even so, it’s important to keep in mind that neither of these programs is in danger of collapsing completely. The question is what type of changes will be required to rescue them.
Demographic Dilemma
The fundamental problem facing both programs is the aging of the American population. Today’s workers pay taxes to fund benefits received by today’s retirees, and with lower birth rates and longer life spans, there are fewer workers paying into the programs and more retirees receiving benefits for a longer period. In 1960, there were 5.1 workers for each Social Security beneficiary; in 2023 there are 2.7, dropping steadily to 2.2 by 2045.3
Dwindling Trust Funds
Payroll taxes from today’s workers, along with income taxes on Social Security benefits, go into interest-bearing trust funds. During times when payroll taxes and other income exceeded benefit payments, these funds built up reserve assets. But now the reserves are being depleted as they supplement payroll taxes and other income to meet scheduled benefit payments.
Each year, the Trustees of the Social Security and Medicare Trust Funds provide detailed reports to Congress that track the programs’ current financial condition and projected financial outlook. These reports have warned for years that the trust funds would be depleted in the not-too-distant future, and the most recent reports, both released on March 31, 2023, suggest that the future may arrive even sooner than expected.
Social Security Outlook
Social Security consists of two programs, each with its own trust fund. Retired workers and their families and survivors 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.
The OASI Trust Fund reserves are projected to be depleted in 2033, one year earlier than in last year’s report, at which time incoming revenue would pay only 77% of scheduled benefits. Reserves in the much smaller DI Trust Fund, which is on stronger footing, are not projected to be depleted during the 75-year period ending 2097.4
Under current law, these two trust funds cannot be combined, but the Trustees also provide an estimate for the combined program, referred to as OASDI. This would extend full benefits another year, to 2034, at which time, incoming revenue would pay only 80% of scheduled benefits.5
Put simply, the current outlook suggests that Social Security beneficiaries might face a benefit cut of 23% in a decade unless Congress takes action.
Medicare Outlook
Medicare also has two trust funds. The Hospital Insurance (HI) Trust Fund pays for inpatient and hospital care under Medicare Part A. The Supplementary Medical Insurance (SMI) Trust Fund comprises two accounts: one for Medicare Part B physician and outpatient costs and the other for Medicare Part D prescription drug costs.
The HI trust fund reserves are projected to be depleted in 2031. This is three years later than in last year’s report, due to lower costs and higher payroll taxes, but still more imminent than the Social Security shortfall. At that time, revenue would pay only 89% of the program’s costs.6
The SMI Trust Fund accounts for Medicare Parts B and D are expected to have sufficient funding because they are automatically balanced through premiums and revenue from the federal government’s general fund, which provides about 75% of costs, a major outlay from the federal budget.7
Possible Fixes
The Trustees of both programs continue to urge Congress to address these financial shortfalls soon, so that solutions will be less drastic and may be implemented gradually.
Any permanent fix to Social Security would likely require a combination of changes, including some of these.8
- Raise the Social Security payroll tax rate (currently 12.4%, half paid by the employee and half by the employer). An immediate and permanent payroll tax increase to 15.84% would be necessary to address the long-range revenue shortfall (or to 16.55% if the increase started in 2034).9
- Raise the ceiling on wages subject to Social Security payroll taxes ($160,200 in 2023).
- Raise the full retirement age (currently 67 for anyone born in 1960 or later).
- Change the benefit calculation formula.
- Use a different index to calculate the annual cost-of-living adjustment.
- Tax a higher percentage of benefits for higher-income beneficiaries.
Options for reducing the Medicare shortfall include a combination of spending cuts and tax increases. These are some possibilities.10
- Improve the payment system for Medicare Advantage Plans (private plans that receive partial funding from Medicare).
- Modernize cost sharing between Medicare and Medigap (supplementary insurance).
- Increase the Medicare payroll tax rate (currently 2.9%, shared equally between employee and employer, with an additional 0.9% on income above $200,000 for single filers and $250,000 for joint filers).11
- Broaden the tax base subject to Medicare payroll taxes (there is no income ceiling for Medicare payroll taxes, but certain income is currently not subject to the tax).
Based on past changes to these programs, it’s likely that any future changes would primarily affect future beneficiaries and have a relatively small effect on those already receiving benefits. While neither Social Security nor Medicare is in danger of disappearing, it would be wise to maintain a strong retirement savings strategy to prepare for potential changes to America’s Safety Net.
All projections are based on current conditions, subject to change, and may not happen.
1) Gallup, April 6, 2023
2) Kaiser Family Foundation, March 2023
3–5, 9) 2023 Social Security Trustees Report
6–7, 11) 2023 Medicare Trustees Report
8) Social Security Administration, February 21, 2023
10) Committee for a Responsible Federal Budget, June 16, 2022
Social Security Offices will not reopen for in-person meetings as originally planned January 3, 2022.
December 22, 2021, SSA announced they would not re-open as many expected.
The public is encouraged to use their online services. https://www.ssa.gov/onlineservices/
Their online services can be accessed by activating your Social Security account. Create an account if you do not have an account.
https://secure.ssa.gov/RIL/SiView.action
https://www.ssa.gov/myaccount/
The phone numbers for the local offices can be found using their “Field Office Locator”
https://secure.ssa.gov/ICON/main.jsp
Their COVID-19 web page provides mor information to learn more.
https://www.ssa.gov/coronavirus/
The Retirement Benefit portal has been updated.
https://www.ssa.gov/benefits/retirement/
Social Security’s Uncertain Future: What You Should Know
Social Security is a pay-as-you-go system, which means today’s workers are paying taxes for the benefits received by today’s retirees. There are many factors that are causing long-run fiscal challenges. Factors causing long-run fiscal challenges, including demographic trends such as lower birth rates, higher retirement rates, and longer life spans. There are simply not enough U.S. workers to support the growing number of beneficiaries. See the discussion under “Pandemic Impact” below. Social Security is not in danger of collapsing, but the clock is ticking on the program’s ability to pay full benefits.
Annually, the Trustees of the Social Security Trust Funds provide a detailed report to Congress that tracks the program’s current financial condition and projected financial outlook. In the latest report, released in August 2021, the Trustees estimate that the retirement program will have funds to pay full benefits only until 2033, unless Congress acts to shore up the program. This day of reckoning is expected to come one year sooner than previously projected because of the economic fallout from the COVID-19 pandemic.
Report Highlights
Social Security consists of two programs, each with its own financial account (trust fund) that holds the payroll taxes that are collected to pay 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. The combined programs are referred to as OASDI.
Combined OASDI costs are projected to exceed total income (including interest) in 2021, and the Treasury will withdraw reserves to help pay benefits. The Trustees project that the combined reserves will be depleted in 2034. After that, payroll tax revenue alone should be sufficient to pay about 78% of scheduled benefits. OASDI projections are hypothetical, because the OASI and DI Trusts are separate, and generally one program’s taxes and reserves cannot be used to fund the other program.
The OASI Trust Fund, considered separately, is projected to be depleted in 2033. Payroll tax revenue alone would then be sufficient to pay 76% of scheduled OASI benefits.
The DI Trust Fund is projected to be depleted in 2057, eight years sooner than estimated in last year’s report. Once the trust fund is depleted, payroll tax revenue alone would be sufficient to pay 91% of scheduled benefits.
All projections are based on current conditions, subject to change, and may not happen.
Proposed Fixes
The Trustees continue to urge Congress to address the financial challenges facing these programs soon, so that solutions will be less drastic and may be implemented gradually, lessening the impact on the public. Combining some of the following solutions may also help soften the impact of any one solution.
- Raising the current Social Security payroll tax rate (currently 12.4%). Half is 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 3.36 percentage points to 15.76% would be needed to cover the long-range revenue shortfall (4.20 percentage points to 16.60% if the increase started in 2034).
- Raising or eliminating the ceiling on wages subject to Social Security payroll taxes ($142,800 in 2021).
- Raising the full retirement age beyond the currently scheduled age of 67 (for anyone born in 1960 or later).
- Reducing future benefits. To address the long-term revenue shortfall, scheduled benefits would have to be immediately and permanently reduced by about 21% for all current and future beneficiaries, or by about 25% if reductions were applied only to those who initially become eligible for benefits in 2021 or later.
- Changing the benefit formula that is used to calculate benefits.
- Calculating the annual cost-of-living adjustment for benefits differently.
Pandemic Impact
The 2021 Trustees Report states that Social Security’s short-term finances were “significantly affected” by the pandemic and the severe but short-lived recession in 2020. “Employment, earnings, interest rates, and GDP [gross domestic product] dropped substantially in the second calendar quarter of 2020 and are assumed to rise gradually thereafter toward recovery by 2023, with the level of worker productivity and thus GDP assumed to be permanently lowered by 1%.” The projections also accounted for elevated mortality rates over the period 2020 through 2023 and delays in births and immigration. Because payroll tax revenues are rebounding quickly, the damage to the program was not as great as many feared.
Sharp increases in consumer prices in July and August suggest that beneficiaries might receive the highest annual benefit increase since 1983 starting in January 2022. The Social Security Administration’s chief actuary has estimated that the 2022 cost-of-living adjustment (COLA) will be close to 6.0%.1(The official COLA had not been announced at the time of this writing.)
What’s at Stake for You?
The Census Bureau has estimated that 2.8 million Americans ages 55 and older filed for Social Security benefits earlier than they had anticipated because of COVID-19.2 Many older workers may have been pushed into retirement after losing their jobs or because they had health concerns.
If you regret starting your Social Security benefits earlier than planned, you can withdraw your application within 12 months of your original claim and reapply later. But you can do this only once, and you must repay all the benefits you received. Otherwise, if you’ve reached full retirement age, you may voluntarily suspend benefits and restart them later. Either of these moves would result in a higher future benefit.
Even if you won’t depend on Social Security to survive, the benefits could amount to a meaningful portion of your retirement income. An estimate of your monthly retirement benefit can be found on your Social Security Statement, which can be accessed when you sign up for my Social Security account on SSA.gov. If you aren’t receiving benefits and haven’t registered for an online account, you should receive an annual statement in the mail starting at age 60.
No matter what the future holds for Social Security, your retirement destiny is still in your hands. But it may be more important than ever to save as much as possible for retirement while you are working. Don’t wait until you have one foot out the door to consider your retirement income strategy.
All information is from the 2021 Social Security Trustees Report, except for:
1) AARP, September 15, 2021
2) U.S. Census Bureau, 2021
Social Security and Medicare Face Financial Challenges
Most Americans will eventually receive Social Security and Medicare benefits. Each year, the Trustees of the Social Security and Medicare Trust Funds release lengthy reports to Congress that assess the health of these important programs. The newest reports, released on April 22, 2020, discuss the current financial condition and ongoing financial challenges that both programs face, and project a Social Security cost-of-living adjustment (COLA) for 2021.
How Social Security and Medicare will be affected by the COVID-19 pandemic is still uncertain; the Trustees acknowledge that the estimates and analysis included in the reports do not reflect the potential effects.
Social Security Trust Funds
The Social Security program consists of two parts, each with its own financial account (trust fund) that holds the Social Security 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. The combined programs are referred to as OASDI. 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 is not needed in the current year to pay benefits and administrative costs is invested (by law) in special Treasury bonds that are guaranteed by the U.S. government and earn interest. As a result, 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.
Note that the Trustees provide certain projections based on the combined OASI and DI (OASDI) Trust Funds. However, these projections are hypothetical, because the trusts are separate, and generally one program’s taxes and reserves cannot be used to fund the other program.
Highlights of Social Security Trustees Report
- Social Security’s total cost is projected to be less than its total income in 2020 and higher than its total income (including interest) in 2021 and all later years. The U.S. Treasury will need to withdraw from trust fund reserves to help pay benefits. The Trustees project that the hypothetical combined trust fund reserves (OASDI) will be depleted in 2035, the same as projected in last year’s report, unless Congress acts.
- Once the hypothetical combined trust fund reserves are depleted in 2035, payroll tax revenue alone should still be sufficient to pay about 79% of scheduled benefits initially, with the percentage falling gradually to 73% by 2094.
- The OASI Trust Fund, when considered separately, is projected to be depleted in 2034, the same as projected in last year’s report. Payroll tax revenue alone would then be sufficient to pay 76% of scheduled benefits.
- The DI Trust Fund is expected to be depleted in 2065, 13 years later than projected in last year’s report. For a second year in a row, the depletion date has changed significantly, reflecting the fact that both benefit applications and the total number of disabled workers currently receiving benefits have been declining over the past few years. Once the DI Trust Fund is depleted, payroll tax revenue alone would be sufficient to pay 92% of scheduled benefits.
- Based on the “intermediate” assumptions in this year’s report, the Social Security Administration is projecting that the cost-of-living adjustment (COLA), which will be announced in the fall of 2020, will be 2.3% (last year’s report projected a COLA of 1.8% and the actual COLA was 1.6%). This COLA would apply to benefits starting in January 2021.
Medicare Trust Funds
There are two Medicare trust funds. The Hospital Insurance (HI) Trust Fund helps pay for hospital care (Medicare Part A costs). The Supplementary Medical Insurance (SMI) Trust Fund comprises two separate accounts, one covering Medicare Part B (which helps pay for physician and outpatient costs) and one covering Medicare Part D (which helps cover the prescription drug benefit).
Highlights of Medicare Trustees Report
- Annual costs for the Medicare HI Trust Fund exceeded tax income each year from 2008 to 2015. There were small fund surpluses in 2016 and 2017. In 2018 and 2019, expenditures exceeded income, and deficits are expected for all later years.
- The HI Trust Fund is projected to be depleted in 2026, the same year as projected in last year’s report. Once the HI Trust Fund is depleted, tax and premium income would still cover 90% of estimated program costs, declining to 78% by 2044 and then gradually increasing to 90% by 2094. The Trustees note that long-range projections of Medicare costs are highly uncertain because the health-care landscape is shifting and the effects are unknown.
Why are Social Security and Medicare Facing Financial Challenges?
Social Security and Medicare are funded primarily through the collection of payroll taxes. Because of demographic and economic factors, including higher retirement rates and lower birth rates, there will be fewer workers per beneficiary over the long term, worsening the strain on the trust funds.
What is Being Done to Address These Challenges?
Both reports continue to urge Congress to address the financial challenges facing these programs soon, so that solutions will be less drastic and may be implemented gradually, lessening the impact on the public. Combining some of the following solutions may also lessen the impact of any one solution.
- Raising the current Social Security payroll tax rate (currently 12.40%). According to this year’s report, an immediate and permanent payroll tax increase of 3.14 percentage points to 15.54% would be necessary to address the long-range revenue shortfall (4.13 percentage points to 16.53% if the increase started in 2035).
- Raising or eliminating the ceiling on wages currently subject to Social Security payroll taxes ($137,700 in 2020).
- Raising the full retirement age beyond the currently scheduled age of 67 (for anyone born in 1960 or later).
- Reducing future benefits. According to this year’s report, to address the long-term revenue shortfall, scheduled benefits would have to be immediately and permanently reduced by about 19% for all current and future beneficiaries, or by about 23% if reductions were applied only to those who initially become eligible for benefits in 2020 or later.
- Changing the benefit formula that is used to calculate benefits.
- Calculating the annual cost-of-living adjustment for benefits differently.
You can view a combined summary of the 2020 Social Security and Medicare Trustees Reports and a full copy of the Social Security report at https://www.ssa.gov/. You can find the full Medicare report at https://www.cms.gov/.
New Medicare cards are coming
New Medicare cards are coming
Medicare is mailing new Medicare cards to all people with Medicare now. Find out more about when your card will mail.
10 things to know about your new Medicare card
- Your new card will automatically come to you. You don’t need to do anything as long as your address is up to date. If you need to update your address, visit your mySocial Security account.
- Your new card will have a new Medicare Number that’s unique to you, instead of your Social Security Number. This will help to protect your identity.
- Your Medicare coverage and benefits will stay the same.
- Mailing takes time. Your card may arrive at a different time than your friend’s or neighbor’s.
- Your new card is paper, which is easier for many providers to use and copy.
- Once you get your new Medicare card, destroy your old Medicare card and start using your new card right away.
- If you’re in a Medicare Advantage Plan (like an HMO or PPO), your Medicare Advantage Plan ID card is your main card for Medicare—you should still keep and use it whenever you need care. And, if you have a Medicare drug plan, be sure to keep that card as well. Even if you use one of these other cards, you also may be asked to show your new Medicare card, so keep it with you.
- Doctors, other health care providers and facilities know it’s coming and will ask for your new Medicare card when you need care, so carry it with you.
- Only give your new Medicare Number to doctors, pharmacists, other health care providers, your insurers, or people you trust to work with Medicare on your behalf.
- If you forget your new card, you, your doctor or other health care provider may be able to look up your Medicare Number online.
Watch out for scams
Medicare will never call you uninvited and ask you to give us personal or private information to get your new Medicare Number and card. Scam artists may try to get personal information (like your current Medicare Number) by contacting you about your new card. If someone asks you for your information, for money, or threatens to cancel your health benefits if you don’t share your personal information, hang up and call us at 1-800-MEDICARE (1-800-633-4227). Learn more about the limited situations in which Medicare can call you.
How can I replace my Medicare card?
If you need to replace your card because it’s damaged or lost, sign in to your MyMedicare.gov account to print an official copy of your Medicare card. If you don’t have an account, visit MyMedicare.gov to create one.
If you need to replace your card because you think that someone else is using your number, let us know.
How do I change my name or address?
Medicare uses the name and address you have on file with Social Security. To change your name and/or address, visit your online my Social Security account.
Medicare is managed by the Centers for Medicare & Medicaid Services (CMS). Social Security works with CMS by enrolling people in Medicare.
New Reports Highlight Continuing Challenges for Social Security and Medicare
Most Americans will receive Social Security and Medicare benefits at some point in their lives. For this reason, workers and retirees are concerned about potential program shortfalls that could affect future benefits. Each year, the Trustees of the Social Security and Medicare Trust Funds release lengthy annual reports to Congress that assess the health of these important programs. The newest reports, released on June 5, 2018, discuss the current financial condition and ongoing financial challenges that both programs face, and project a Social Security cost-of-living adjustment (COLA) for 2019.
What are the Social Security and Medicare Trust Funds?
Social Security: The Social Security program consists of two parts. 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. The combined programs are referred to as OASDI. Each program has a financial account (a trust fund) that holds the Social Security payroll taxes that are collected to pay Social Security benefits. 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 is not needed in the current year to pay benefits and administrative costs is invested (by law) in special Treasury bonds that are guaranteed by the U.S. government and earn interest. As a result, 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.
Note that the Trustees provide certain projections based on the combined OASI and DI (OASDI) Trust Funds. However, these projections are theoretical, because the trusts are separate, and generally one program’s taxes and reserves cannot be used to fund the other program.
Medicare: There are two Medicare trust funds. The Hospital Insurance (HI) Trust Fund helps pay for hospital care (Medicare Part A costs). The Supplementary Medical Insurance (SMI) Trust Fund comprises two separate accounts, one covering Medicare Part B (which helps pay for physician and outpatient costs) and one covering Medicare Part D (which helps cover the prescription drug benefit).
Highlights of Social Security Trustees Report
- This year, for the first time since 1982, Social Security’s total cost is projected to exceed its total income (including interest), and remain higher for the next 75 years. Consequently, the U.S. Treasury will start withdrawing from trust fund reserves to help pay benefits in 2018. The Trustees project that the combined trust fund reserves (OASDI) will be depleted in 2034, the same year projected in last year’s report, unless Congress acts.
- Once the combined trust fund reserves are depleted, payroll tax revenue alone should still be sufficient to pay about 79% of scheduled benefits for 2034, with the percentage falling gradually to 74% by 2092.
- The OASI Trust Fund, when considered separately, is projected to be depleted in 2034. Payroll tax revenue alone would then be sufficient to pay 77% of scheduled benefits.
- The DI Trust Fund is expected to be depleted in 2032, four years later than projected in last year’s report. Both benefit applications and the total number of disabled workers currently receiving benefits have been declining. Once the DI Trust Fund is depleted, payroll tax revenue alone would be sufficient to pay 96% of scheduled benefits.
- Based on the “intermediate” assumptions in this year’s report, the Social Security Administration is projecting that the cost-of-living adjustment (COLA), announced in the fall of 2018, will be 2.4%. This COLA would apply to benefits starting in January 2019.
Highlights of Medicare Trustees Report
- Annual costs for the Medicare program exceeded tax income each year from 2008 to 2015. Although last year’s report projected surpluses in 2016 through 2022, this year’s report projects that costs will exceed income (excluding interest income) in 2018.
- The HI Trust Fund is projected to be depleted in 2026, three years earlier than projected last year. Once the HI Trust Fund is depleted, tax and premium income would still cover 91% of estimated program costs, declining to 78% by 2042 and then gradually increasing to 85% by 2092. The Trustees note that long-range projections of Medicare costs are highly uncertain.
Why are Social Security and Medicare facing financial challenges?
Social Security and Medicare are funded primarily through the collection of payroll taxes. Because of demographic and economic factors including higher retirement rates and lower birth rates, there will be fewer workers per beneficiary over the long term, worsening the strain on the trust funds.
What is being done to address these challenges?
Both reports urge Congress to address the financial challenges facing these programs soon, so that solutions will be less drastic and may be implemented gradually, lessening the impact on the public. Combining some of these solutions may also lessen the impact of any one solution.
Some long-term Social Security reform proposals on the table are:
- Raising the current Social Security payroll tax rate. According to this year’s report, an immediate and permanent payroll tax increase of 2.78 percentage points would be necessary to address the long-range revenue shortfall (3.87 percentage points if the increase started in 2034).
- Raising the ceiling on wages currently subject to Social Security payroll taxes ($128,400 in 2018).
- Raising the full retirement age beyond the currently scheduled age of 67 (for anyone born in 1960 or later).
- Reducing future benefits. According to this year’s report, scheduled benefits would have to be reduced by about 17% for all current and future beneficiaries, or by about 21% if reductions were applied only to those who initially become eligible for benefits in 2018 or later.
- Changing the benefit formula that is used to calculate benefits.
- Calculating the annual cost-of-living adjustment for benefits differently.
According to the Medicare Trustees Report, to keep the HI Trust Fund solvent for the long term (75 years), the current 2.90% payroll tax would need to be increased immediately to 3.72% or expenditures reduced immediately by 17%. Alternatively, other tax or benefit changes could be implemented gradually and might be even more drastic.
You can view a combined summary of the 2018 Social Security and Medicare Trustees Reports and a full copy of the Social Security report at ssa.gov. You can find the full Medicare report at cms.gov.
New Medicare Cards Are Coming
If you receive Medicare, you will be getting a new Medicare card in the mail. To help prevent fraud and fight identity theft, Medicare is removing Social Security Numbers from Medicare cards. Your new card will have a new Medicare Number that’s unique to you.
When are new cards being mailed?
Medicare will be mailing new red, white, and blue paper Medicare cards between April 2018 and April 2019. Card mailings will be staggered, so the timing will depend on your geographical location.
Newly eligible people will begin receiving the new cards starting in April. The following table from the Centers for Medicare & Medicaid Services shows when Medicare will be mailing cards to existing Medicare recipients. You can check the status of card mailings in your area on medicare.gov/newcard.
| Wave | States Included | Cards Mailing |
| 1 | Delaware, District of Columbia, Maryland, Pennsylvania, Virginia, West Virginia | Beginning May 2018 |
| 2 | Alaska, American Samoa, California, Guam, Hawaii, Northern Mariana Islands, Oregon | Beginning May 2018 |
| 3 | Arkansas, Illinois, Indiana, Iowa, Kansas, Minnesota, Nebraska, North Dakota, Oklahoma, South Dakota, Wisconsin | After June 2018 |
| 4 | Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont | After June 2018 |
| 5 | Alabama, Florida, Georgia, North Carolina, South Carolina | After June 2018 |
| 6 | Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Texas, Utah, Washington, Wyoming | After June 2018 |
| 7 | Kentucky, Louisiana, Michigan, Mississippi, Missouri, Ohio, Puerto Rico, Tennessee, Virgin Islands | After June 2018 |
Some tips on using your new Medicare card
The following tips are from the Medicare website, medicare.gov.
- Your new card will be mailed to you automatically. You don’t need to do anything as long as your address is up-to-date. If you need to update your address, contact Social Security at https://www.ssa.gov/myaccount/ or 1-800-772-1213.
- Once you receive your new Medicare card, destroy your old Medicare card and start using your new card right away.
- Doctors, other health-care providers, and facilities will ask for your new Medicare card when you need care, so carry it with you.
- If you’re in a Medicare Advantage Plan (like an HMO or PPO), your Medicare Advantage Plan ID card is your main card for Medicare — you should still keep and use it whenever you need care. However, you also may be asked to show your new Medicare card, so you should carry this card, too.
- Medicare will never call you uninvited and ask you to give out personal or private information to get your new Medicare Number and card.
- Scam artists may try to get personal information (like your current Medicare Number) by contacting you about your new card. If so, hang up and call 1-800-Medicare.
Six Steps to Consider Before Tapping Your Retirement Savings Plan
You’ve worked long and hard for years, saving diligently through your employer-sponsored retirement savings plan. Now, with retirement on the horizon, it’s time to begin thinking about how to tap your plan assets for income. But hold on, not so fast. You may need to take a few steps first.
Step 1: Evaluate your needs
The first step in any retirement income plan is to estimate how much income you’ll need to meet your desired lifestyle. The conventional guidance is to plan on needing anywhere from 70% to 100% of your pre-retirement income each year during retirement; however, your amount will depend on your unique circumstances. While some expenses may fall in retirement, others may rise. So before even thinking about how to tap your plan assets, you should have a concrete idea of how much you’ll need to (1) cover your basic needs and (2) live comfortably, according to your wishes.
First, estimate your non-negotiable fixed needs — such as housing, food, and medical care. This will help you project how much you’ll need just to make ends meet. Then focus on your variable wants — including travel, leisure, and entertainment. This is the area that you’ll have the easiest time adjusting, if necessary, as you refine your income plan.
Step 2: Assess your sources of predictable income
Next, you’ll want to determine how much to expect from sources of predictable income, such as Social Security and traditional pension plans. These could be considered the foundation of your retirement income.
Social Security
A key decision regarding Social Security is when to claim benefits. Although you can begin receiving benefits as early as age 62, the longer you wait to begin (up to age 70), the more you’ll receive each month.
The Social Security Administration (SSA) calculates your retirement benefit using a formula that takes into account your 35 highest earning years, so if you had some years of no or low earnings, your benefit amount may be lower than if you had worked steadily.
You can estimate your retirement benefit by using the calculators on the SSA website, https://www.ssa.gov . You can also sign up for a my Social Security account so that you can view your Social Security Statement online. Your statement contains a detailed record of your earnings, as well as estimates of retirement, survivor, and disability benefits, along with other information about Social Security.
Pensions
Traditional pensions have been disappearing from employer benefit programs over the past couple of decades. If you’re one of the lucky workers who stand to receive a pension benefit, congratulations! But be aware of your pension’s features. For example, will your benefit remain steady throughout retirement or increase with inflation?
Your pension will most likely be offered as either a single or joint and survivor annuity. A single annuity provides benefits until the worker’s death, while a joint and survivor annuity generally provides reduced benefits until the survivor’s death.1
Step 3: Reflect
If it looks as though your Social Security and pension income will be enough to cover your fixed needs, you may be well positioned to use your retirement savings plan assets to fund the extra wants. On the other hand, if those sources are not sufficient to cover your fixed needs, you’ll need to think carefully about how to tap your retirement savings plan assets, as they will be a necessary component of your income.
Step 4: Understand your plan options
Upon leaving your employer, you typically have four options:
1. Plans may allow you to leave the money alone or may require that you begin taking distributions once you reach the plan’s normal retirement age.
2. You may choose to withdraw the money, either as a lump sum or a series of substantially equal periodic payments for the rest of your life, or you might use other withdrawal options offered by your plan. Note that the Government Accountability Office (GAO) found that only third of 401(k) plans offer other withdrawal options, such as installment payments, systematic withdrawals, and managed payout funds.
3. You may roll the money into an IRA. You’ll want to carefully compare the investment options, fees, and expenses of both your current plan and the IRA before making any rollover decision.
4. If you continue to work during your retirement years, you may be able to roll the money into your new employer’s plan, if that plan allows. Again, be sure to compare plans before making any decisions.
An annuity is an insurance contract designed to provide steady income over a set period of time or over either your lifetime or that of you and your spouse. According to the GAO, only about 25% of 401(k) plans offer an annuity option as a plan feature. If you think an annuity may apply to your situation, check to see if it is available in your plan. You may want to consider rolling at least some of your tax-deferred money into an IRA and purchasing an immediate fixed annuity. As noted above, however, you’ll want to carefully compare fees and expenses associated with all options before making any final decisions.3
Step 5: Compare tax deferred and tax-free
If you have both tax-deferred and tax-free (Roth) accounts, consider that the taxable portion of distributions from tax-deferred accounts will be taxed at your current income tax rate, while qualified withdrawals from Roth accounts are tax-free. For this reason, general guidelines often suggest tapping tax-deferred accounts before Roth accounts to allow those accounts to continue potentially growing free of taxes.
Note that all assets in employer-sponsored retirement savings plans — even money held in Roth accounts — will be subject to required minimum distributions (RMDs). These rules state that minimum distributions generally must begin in the year you turn age 70½; however, you may delay your first distribution up to April 1 of the following year.
Roth IRAs, however, are not subject to RMD rules until after your death. This is just one reason you might consider converting your employer-sponsored retirement assets to a Roth IRA. Keep in mind that a conversion will trigger an immediate tax consequence on the taxable portion of the converted assets, which can result in a hefty bill from Uncle Sam.
Step 6: Seek professional assistance
Determining the appropriate way to tap your assets can be challenging and should take into account a number of factors. These include not only your tax situation, but also whether you have other assets you’ll use for income, your overall health, and your estate plan. A financial professional can help make sense of your options in light of your unique situation.
1 Current federal law requires employer-sponsored plan participants to select a joint and survivor annuity unless the spouse waives those rights. This requirement is not mandated in an IRA, however.
2 “401(k) Plans: DOL Could Take Steps to Improve Retirement Income Options for Plan Participants,” GAO Report to Congressional Requesters, August 2016
3 Generally, annuity contracts have fees and expenses, limitations, exclusions, holding periods, termination provisions, and terms for keeping the annuity in force. Most annuities have surrender charges that are assessed if the contract owner surrenders the annuity in the early years of the contract. Qualified annuities are typically purchased with pre-tax money, so withdrawals are fully taxed as ordinary income. Withdrawals prior to age 59½ may be subject to a 10% federal income tax penalty. Any guarantees are contingent on the financial strength and claims-paying ability of the issuing insurance company. It is important to understand that purchasing an annuity in an IRA or an employer-sponsored retirement plan provides no additional tax benefits other than those available through the tax-deferred retirement plan.
The foregoing is provided for information purposes only. It is not intended or designed to provide legal, accounting, tax, investment or other professional advice. Such advice requires consideration of individual circumstances. Before any action is taken based upon this information, it is essential that competent, individual, professional advice be obtained. JAS Financial Services, LLC is not responsible for any modifications made to this material, or for the accuracy of information provided by other sources.
Medicare Premiums and Other Costs for 2016
During the past several weeks, you may have seen media reports announcing that Medicare Part B premiums would be rising dramatically for some beneficiaries in 2016. But thanks to a provision in the Bipartisan Budget Act of 2015 signed into law on November 2, affected beneficiaries face more modest increases next year. Standard Medicare Part B premiums for the majority of beneficiaries won’t be rising at all.
What you’ll pay for Medicare Part B in 2016
The Centers for Medicare & Medicaid Services (CMS) has announced that in 2016, most individuals (about 70% of Medicare beneficiaries) will continue to pay $104.90 per month for Medicare Part B (Medical Insurance), the same standard premium they paid in 2013, 2014, and 2015. If you fall into this category, your premium won’t be rising because you won’t be receiving a Social Security cost-of-living allowance (COLA) increase in your benefit next year, as was previously announced by the Social Security Administration (SSA). Due to a provision in the Social Security Act, you are “held harmless” from Part B premium increases when no Social Security COLA is payable.
Unfortunately, this is not the case for the approximately 30% of Medicare beneficiaries who are not subject to this “hold harmless” provision. You fall into this group and will pay more for Medicare Part B next year if:
- You enroll in Part B for the first time in 2016.
- You don’t get Social Security benefits.
- You have Medicare and Medicaid, and Medicaid pays your premiums.
- Your modified adjusted gross income as reported on your federal income tax return from two years ago is above a certain amount.*
The table below shows what you’ll pay next year if you’re in this group.
| Beneficiaries who file an individual income tax return with income that is: | Beneficiaries who file a joint income tax return with income that is: | Beneficiaries who file an income tax return as married filing separately with income that is: | Monthly premium in 2015: | Monthly premium in 2016: |
| $85,000 or less | $170,000 or less | $85,000 or less | $104.90 | $121.80 |
| Above $85,000 up to $107,000 | Above $170,000 up to $214,000 | N/A | $146.90 | $170.50 |
| Above $107,000 up to $160,000 | Above $214,000 up to $320,000 | N/A | $209.80 | $243.60 |
| Above $160,000 up to $214,000 | Above $320,000 up to $428,000 | Above $85,000 up to $129,000 | $272.70 | $316.70 |
| Above $214,000 | Above $428,000 | Above $129,000 | $335.70 | $389.80 |
Although substantial, Part B premiums are far less than originally projected for 2016 because of a provision in the Bipartisan Budget Act of 2015 that limited premium increases for beneficiaries who are not subject to the “hold harmless” provision.
*Beneficiaries with higher incomes have paid higher Medicare Part B premiums since 2007. To determine if you’re subject to income-related premiums, the SSA uses the most recent federal tax return provided by the IRS. Generally, the tax return you filed in 2015 (based on 2014 income) will be used to determine if you will pay an income-related premium in 2016 (your 2013 income was used for 2015 premiums). You can contact the SSA at (800) 772-1213 if you have new information to report that might change the determination and lower your premium (you lost your job and your income has gone down or you’ve filed an amended income tax return, for example).
Changes to other Medicare costs
Other Medicare Part A and Part B costs will change in 2016, including the following:
- The annual Medicare Part B deductible for Original Medicare will be $166, up from $147 in 2015.
- The monthly Medicare Part A (Hospital Insurance) premium for those who need to buy coverage will cost up to $411, up from $407 in 2015. However, most people don’t pay a premium for Medicare Part A.
- The Medicare Part A deductible for inpatient hospitalization will be $1,288, up from $1,260 in 2015. Beneficiaries will pay an additional daily co-insurance amount of $322 for days 61 through 90, up from $315 in 2015, and $644 for stays beyond 90 days, up from $630 in 2015.
- Beneficiaries in skilled nursing facilities will pay a daily co-insurance amount of $161 for days 21 through 100 in a benefit period, up from $157.50 in 2015.
For more information on costs and benefits related to Social Security and Medicare, visitSocialsecurity.gov andMedicare.gov.
To view the Medicare fact sheet announcing these and other figures, visit Medicare.gov.
The foregoing is provided for information purposes only. It is not intended or designed to provide legal, accounting, tax, investment or other professional advice. Such advice requires consideration of individual circumstances. Before any action is taken based upon this information, it is essential that competent, individual, professional advice be obtained. JAS Financial Services, LLC is not responsible for any modifications made to this material, or for the accuracy of information provided by other sources.
Some Social Security tactics are eliminated as part of the “budget deal”
| Following is a summary of the tactics that will be eliminated:
Voluntary Suspension When the legislation becomes effective, all benefits paid from an account will be suspended when a person suspends their benefit. Previously, a beneficiary could suspend their benefits while a spouse or qualifying children could continue collecting a benefit from their account. The new legislation will require that a beneficiary be receiving his or her own benefit in order for other benefits to be paid from their record. The new legislation does not prevent the suspending of benefits for the purpose of accruing delayed retirement credits. If a person files early and later decides it was a mistake, they will be able to suspend benefits at full retirement age and accrue delayed retirement credits. However, any other benefits being paid from the suspended benefit will stop. Someone who has already claimed benefits with a file and suspend strategy, or anyone who implements such a strategy within the next 6 months, can continue with their strategy. Restricted Application The new legislation extends a concept called “deemed filing.” Deemed filing has only been a factor before reaching full retirement age. Prior to reaching full retirement age, if a person filed for any benefit, they were “deemed to be filing” for all benefits. This meant that if someone was eligible for their own benefit and a spousal benefit, they would only be paid a single benefit, the higher of the two. But if the individual waited until full retirement age to claim a benefit, they could choose which benefit to receive. If the choice was made to receive a spousal benefit, their own retirement benefit would continue to accrue delayed retirement credits. The new rule extends the deemed filing provision to age 70, meaning that the payable benefit will always be the higher benefit if eligible for more than one. The new rules about restricted application apply only to individuals who attain age 62 after 2015. For those who achieve age 62 prior to 2016, it remains possible to file a restricted application for spousal benefits only at full retirement age. However, this option is being effectively “phased out” over the next four years. Widows and Divorced Benefits Divorced benefits seem to have suffered what some are calling an unintended consequence of the legislation. As of now, since filing a restricted application will not be available for anyone reaching age 62 after 2015, divorced individuals will not able to use this option unless they fall into the grandfathered group who will already be aged 62 by the end of 2015. The above is an edited version of several explanation prepared before the enactment of the legislation. It is possible the published version of the legislation may differ. Your plans included the above tactics, you should revise your plans. You may need to act quickly if you are close to age 62 to preserve these tactics for your situation.
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