Retirement Plan Changes

  • With the election results behind us, I am starting to hear rumors of social security, Medicare, and military entitlement cuts. As a retiree this concerns me because this would threaten my income and future. Is this all speculation or could this really happen? If that's the reality that I am facing how can I protect my income stream from these sources?

    I hope you have some ideas!

    Thank you for some insight,


    Good question, but I wouldn't get overly concerned. Most of what you see in the media is just hype to help them get an audience.


    There probably will be some changes. There almost has to be because there's not enough money to keep all the promises that have been made. We can't do an in depth look here, but we can share some info.


    First, Social Security. The facts (according to the Social Security Administrators) is that SS is paying out more each year than it's taking in. That's been true for a year or so. It'll get worse as more baby boomers begin to collect. The difference comes from the Social Security trust fund (which is a collection of IOUs from the federal treasury). That trust fund is projected to run out of money in 2033. At that time the projections are that taxes will only cover 75% of the promised benefits.


    So what's likely to happen? Congress is highly unlikely to cut your benefits by 25%. That would be political suicide. They'll probably do something that affect people who's retire 20 years from now. They might remove those who are collecting SS disability (nearly 9 million people as of Nov 2016) from the system and pay them from general tax revenue. They'll probably also try to keep cost of living increases to a minimum.


    Any changes to Medicare will affect doctors, hospitals and medical suppliers (think pharmaceuticals) most. Seniors won't feel changes in their pocketbooks, but rather in terms of whether they can find a doctor who will accept Medicare payment.


    Military pension benefits are unlikely to be cut. Again, that would be a political non-starter. If anything they're likely to allow VA medical benefits to be taken to private doctors if that's what the vet wants or needs.


    You don't mention it, but one area that could be in jeopardy is pension benefits promised by cities, counties and states. Most are not funded. If you want to see how that's working out read about Detroit or various cities in California that are facing/declaring bankruptcy. The choices they face are awful. Either break a promise to retirees or fail to provide needed government services (police, fire, schools, utilities, etc). Those pension benefits might be cut in the future with minimal warning.


    What can you do? Prepare for retirement by paying down any debts, including mortgages, that you might have (we'd love to help you with that). Try to save enough in and out of retirement plans to provide you with a dependable source of income. There's never a market guarantee, but historically you could take about 4% of your principal each year as income without reducing the principal. So for every $100k you've saved you'll have $4k a year in income.


    Talk to your elected reps and hold their feet to the fire. The easiest and safest thing for them to do is to hope that the problem goes away. It won't. The sooner they address it the easier it will be to solve. Not easy. But easier. The longer they delay the more drastic the solution will be.


    Stay tuned here at TDS. We'll do our best to keep you informed and give you the information that you need to make good decisions.

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