Charles Schwab Proposes Tax Break for America’s Seniors

May 17, 2017 /

In a recent WSJ feature, veteran broker Charles Schwab advocates giving older Americans a break on their Social Security taxes.

When we’re discussing Social Security taxes, we’re talking about two distinct taxes:

  1. Social Security’s payroll taxes; presently 6.2% each for both employees and employers (totaling 12.4% for the self-employed).
  2. Social Security’s benefits surtax, a provision of the 1983 amendments indirectly taxing Social Security benefits for higher-income earners.

Mr. Schwab advocates the elimination of the Social Security and Medicare payroll taxes after age 65 on the first $50,000 of earned income—incentivizing continued earnings on the part of older Americans without giving the nation’s affleunt too much of a break. He’s proposing the benefits surtax be entirely removed in “the spirit of fairness.”

Of course, it’s important to remember that this surtax was part of an emergency measure effected to prevent Social Security’s Trust Fund from exhausting. But because the thresholds for this tax were set in 1983 and have not been adjusted for inflation, these taxes are beginning to affect Americans of more moderate means.

Mr. Schwab believes his proposal to eliminate the surtax should receive bipartisan support. And indeed, legislative proposals have shone a new light on the benefits surtax. A reform proposal authored by Rep. Sam Johnson (R-TX) would phase out the taxes on Social Security benefits, while a proposal across the aisle from Rep. John Larson (D-CT) adjust the thresholds for the benefits surtax for inflation— a measure which should theoretically reduce the population subject to the surtax to 1983 levels.

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Savvy Social Security May 11 Newsletter Now Available Online

May 17, 2017

Here, Elaine discusses the financial challenges confronted by women as they reach old age, and the ways your advice can help them better prepare for those challenges.

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SSA.GOV Accounts to Require Stronger Authentication

May 10, 2017 /

Starting June 10, 2017, holders of Social Security accounts will need another authentication step to log in. When they sign in using their username and password, they’ll receive a one-time security code to finish their login. The security code may be delivered through text message or email, depending on user preference.

The Social Security Administration attempted to put in place a similar measure in August of last year. Under last year’s measure, the one-time security code could only be sent through text message—posing a potential obstacle to senior citizens without cell phones, or who were otherwise uncomfortable providing the Social Security Administration with a phone number.

Cybersecurity expert Brian Krebs recommends everyone set up an online Social Security account—and soon. According to Krebs, identity thieves can use a retiree’s personal information to register them for an online Social Security account, then have the victim’s benefits diverted to prepaid debit cards. Because only one Social Security account may be created per SSN, this scam can be defeated by signing up for an account on your own.

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House Passes Obamacare Repeal Bill

May 4, 2017 /

The revised American Health Care Act passed the House in a narrow 217-213 vote, and faces an uncertain future before the Senate.

The bill repeals Obamacare’s insurance mandates and expansion of Medicaid, replacing these measures with a tax credit aimed at helping people buy new insurance. More analysis can be found at the Hill.

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Savvy Social Security April 27 Newsletter Now Available Online

Apr 30, 2017

In it, we discuss the principles of successful events for CPAs and other COIs, and the ways your burgeoning Social Security knowledge can help you appeal to those audiences.

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NBER Reports Strong Positive Correlation Between Wealth and Life Expectancy

Apr 21, 2017 /

Though older Americans are generally living longer than they have in prior decades, an emerging body of literature suggests that these gains are mostly reserved for the wealthy.

For Social Security and Medicare, the policy implications of this trend are highly significant. According to the NBER, the life expectancy gulf between the wealthiest and the poorest will rise about 8 years between the 1930 and 1960 birth cohorts. Because Social Security is a lifetime annuity, the gap in average lifetime program benefits received by men in the highest and lowest quintiles to widen by $130,000 over this same period.

These findings also imply that raising the full retirement age—an indirect benefit cut and one of the most commonly discussed proposals to restore solvency to the Social Security system—would have disproportionate consequences for the nation’s poor.

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The 50 Jobs Where People Retire the Earliest

Apr 19, 2017 /

TIME recently published a list of professions where people retire in droves before age 66, the current full retirement age for Social Security.

In many cases, the early retirement phenomenon might be attributed to the physical demands of the job—for instance, sheet-metal workers have the third lowest percentage of employees age 66+. However, many less physically intensive jobs are represented: Financial analysts are listed fourth, and logisticians come in second.

Of all professions, emergency medical technician and paramedic contain the lowest percentage of older Americans. This may not be so surprising, as those are physically demanding, high-stress jobs with an emphasis on response time.

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Social Security Is Mailing Fewer Statements—It Matters More Than You Think

Apr 13, 2017 /

Workers who receive paper statements from Social Security are less likely to claim their benefits early, according to new research from Barbara Smith, a senior economist with the Social Security Administration.

Workers may claim their benefits at any age between 62 or 70. Those who claim early may receive more checks over a lifetime, but those who claim later receive a substantially higher monthly check.

Practically speaking, the higher monthly check is usually more worthwhile: You’ll receive more income later in life when other income streams start to dwindle, and should you predecease your spouse, they’ll receive your enhanced monthly check as a survivor benefit.

The Social Security Administration’s decision to curb its direct mail expenditures will save the department $11.3 million in costs, while preserving paper statements for those 60 and older who haven’t claimed yet. While this seems like a good practical step, Smith’s preliminary research implies Americans have become reliant on paper statements for making informed Social Security claiming decisions, even though they can theoretically access the same information online.

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Trump Administration Toys With Idea of Cutting Social Security Payroll Tax

Apr 11, 2017 /

The details of the administration’s new tax plans remain obscure, but a tentatively proposed cut to the Social Security payroll tax has provoked sharp criticism among Social Security’s advocates. Under this proposal, Social Security would be funded through a value-added tax on imports instead of joint worker-employer contributions.

Nancy J. Altman, longtime program advocate and author of Social Security Works, described the proposal as a “Trojan Horse,” a stealth benefit cut masquerading as a “gift in the form of middle class tax relief.” Michael Hiltzik of the LATimes argues that funding Social Security through anything besides worker contributions degrades the historical and philosophical backbone of the program, making it more akin to welfare—and, ultimately, setting it up to be dismantled.

Sen. Rob Portman (R-Ohio) discouraged the press and the public from overreacting to the current proposal, remarking that “(the administration) is working on various ideas” and that the trial balloons surfacing in the public don’t neccessarily reflect the work happening behind the scenes.

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White House Budget Director Calls Social Security Disability ‘Wasteful’

Apr 10, 2017 /

Analysts at the Washington Post took issue with budget director Mick Mulvaney’s word choice, arguing that the program’s financial problems are not necessarily the product of “waste” as we typically think of it—overpayments, beneficiaries enrolled under false premises, and so on—but rather systemic issues with Social Security finance.

Word choice notwithstanding, the disability trust fund isn’t without its financial woes. The DI fund was slated to exhaust in 2016, before a bipartisan 2015 bill reallocated funds, pushing the depletion date back to 2023. In the unlikely event that no further action is taken by Congress, benefits will fall to 89% of their scheduled levels—an automatic cut.

When pressed on President Trump’s promise not to cut entitlements, Mulvaney replied that Social Security disability insurance is not generally “what people think of when they think of Social Security,” the implication being that cuts to this program would not violate the spirit of the President’s campaign promises.

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The Social Security 2100 Act

Apr 6, 2017 /

On Wednesday morning, Rep. John Larson (D-CT) introduced the Social Security 2100 Act, a measure strongly supported by progressive Social Security advocacy organization Social Security Works.

The bill would raise the thresholds on the Social Security benefits tax from $25,000 (individuals) and $32,000 (couples) to $50,000 and $100,000, respectively—incidentally, an earlier Republican proposal contained similar measures.

Larson’s proposal would also raise the maximum taxable wage base from $127,000 to $400,000, provide modest benefit increases for all beneficiaries, and raise the minimum Social Security benefit. Finally, the Social Security 2100 Act phases in a tax hike in the distant future to preserve solvency beyond the 75 year horizon used by the Social Security trustees in their projections.

In a press release issued Wednesday morning, Rep. Larson remarks that “Social Security is not an entitlement: it’s the insurance Americans have paid for to fund retirement, disability, and survivor benefits through a lifetime of work. Seniors depend on Social Security and no one should retire into poverty.”

The full text of the bill may be found on Rep. Larson’s webpage.

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Social Insurance in Service to Economic Mobility

Mar 29, 2017 /

In a critique of Representative Ryan’s recent remarks on the American Healthcare Act, Forbes contributer Robert Hockett appeals to history to discuss the merits of social insurance programs like the Affordable Care Act and Social Security.

Hockett attributes the resurgence of Germany’s economy following World War II to the social insurance programs first implemented by Otto von Bismarck a century prior. Bismarck, no liberal or idealist, implemented social insurance programs out of stone-cold pragmatism—he knew a fearful, uninsured populace would weigh down the nation’s economy.

By shifting the fiscal burden of insurance from the individual to the collective, Hockett argues, we free those who would otherwise behave very conservatively—thus acting as economic dead weight—to pursue riskier but more economically healthy ventures. For example, someone who would ordinarily funnel their income into a health savings account might instead invest the money or start a new business.

Visit Forbes for Hockett’s complete remarks on the subject.

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Social Security as a Suicide Prevention Tool

Mar 28, 2017 /

A new study by economist Jeffrey DeSimone reveals a “significant, sudden drop in suicide rates upon turning 62 years old” particularly among men. DeSimone attributes this decline to the onset of Social Security eligibility.

His reasoning: Though Americans retire at various ages, all Americans are extended a powerful economic lifeline at age 62. Studies indicate most Americans are still electing Social Security benefits at 62, even if they’re retiring later.

This should not be construed as an endorsement of early Social Security claiming, which not only reduces the worker’s monthly benefit amount, but also has disastrous implications for his widow’s benefits. Nonetheless, DeSimone’s study serves as a stark reminder of the positive impact of social insurance on the nation’s health.

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Savvy Social Security March 16 Newsletter Now Available Online

Mar 17, 2017

In this edition, Elaine discusses the future of the Republican answer to Obamacare, as well as the practical effects this legislation could have on your clients.

Notably, two hefty taxes on top earners may be on their way out, but premiums for older Americans who retire before Medicare age may rise substantially.

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Women and the American Retirement Savings Problem

Mar 16, 2017 /

Women tend to live longer and earn less than men over their lifetimes, contributing to unique difficulties in saving for retirement. Every year, the Transamerica Center for Retirement Studies (TCRS) explores the problems which cause women undue hardship in retirement planning.

Some standout findings include:

  • 45% percent of surveyed women expressed medium-to-low confidence in their retirement prospects, compared to 32% of men.
  • Only 19% of surveyed women have a “Plan B” in the event that they’re forced into retirement sooner than expected, compared to 31% of men.
  • 27% of women expect Social Security to be their primary source of retirement income, compared to 23% of men.
  • Median household retirement savings among women comes to $34,000. The median for men is $115,000.
  • 34% of both men and women report that working with a financial advisor would motivate them to learn more about saving and investing for retirement.

Daniel Williams of LifeHealthPro provides further analysis here.

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House Republicans Unveil Major ACA Change Bill Draft

Mar 7, 2017 /

A full 123-page draft of the American Health Care Act may be download from the House GOP’s website.

The bill eliminates the Affordable Care Act’s individual health insurance mandate, as well as the employer group health offer mandate. Furthermore, Medicaid is being reframed as a block grant system, with an emphasis on controlling future program costs and the greater enforcement of Medicaid eligibility rules.

A comment from Speaker Ryan’s press office may be read here. Further analysis from LifeHealthPro here.

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A Few Changes the New HHS Secretary Can Make in the Short Term

Feb 28, 2017 /

Our new conservative Secretary of Health and Human Services, Tom Price, was confirmed by Congress this month. Though the secretary cannot legislate, he can set the agenda in other ways—for instance, by changing how statutory laws are enforced. He may defang certain rules, while ramping up the enforcement of others.

Dr. Price’s potential next moves are analyzed here by Julie Rovner of Kaiser Health News.

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CRR Releases Brief on Cognitive Aging

Feb 24, 2017 /

According to Boston College’s Center for Retirement Research, aging affects cognition - “the act or process of knowing” in some counterintuitive ways.

Unsurprisingly, our ability to learn entirely new skills diminishes over time. However, the news is not all bad: our “crystallized intelligence,” or stock of useful knowledge, generally improves with age.

This growing stock enables us to continue making good decisions as we age through our 50s and 60s, remaining largely competitive with younger cohorts—despite generally needing more time to learn new skills. And though the risk of cognitive impairment increases as we age beyond 70, a majority of senior citizens remain qualified to manage financial decisions.

Future CRR briefs will provide a deeper dive into the problems of cognitive decline in old age, as well as their consequences for financial decisions.

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Savvy Social Security February 9 Newsletter Now Available Online

Feb 13, 2017

In Dealing With the Earnings Test, Elaine discusses the nuances of one of Social Security’s most challenging and least understood rules.

Though Elaine recommends avoiding the earnings test entirely by claiming at full retirement age or later, there are ways to minimize the nuisance caused by the earnings test—even for those who file early and continue to work.

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Social Security Awaits Appointment of New Commissioner

Feb 6, 2017 /

The program has been in leadership limbo since 2013, when the term of Bush appointee Michael J. Astrue ended. Obama attempted to appoint a replacement—Carolyn W. Colvin— however, her appointment stalled in Congress.

The commissioner oversees the successful administration of the Social Security program—commissioners are not policymakers so much as executives. For this reason, this appointment has less to do with the future direction of the program than Congress or the President’s cabinet. However, some Congressmen have taken issue with this continued vacancy, criticizing the Obama Administration for failing to give the issue their full attention.

A spokeswoman for Finance Committee Chairman Orrin Hatch (R-Utah) commented that “(Chairman Hatch believes) an agency benefits from permanent leadership, and remains disappointed in the Obama administration’s lack of seriousness in trying to ensure that such would be the case for the SSA.”

Now, with President Trump in power and organizing his administration, the future of Social Security’s leadership becomes an open question once more. In the meantime, Nancy A. Berryhill continues to serve as acting director. John Fritze of the Baltimore Sun further analyzes the issue here.

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