Thursday, July 07, 2011
Obama ready to deal on Social Security: could it affect current retirees?
As I noted on my TV blog late last night in reporting on AC360, President Obama said late Wednesday that he could consider massive spending cuts in Social Security and Medicare as part of the “debt extension deal” with the GOP.
This was reported in the Washington Post late Wednesday, and CNN has a slightly more detailed story here. Democrats have been unwilling to state specifically who the cuts could affect, although one area mentioned by CNN is COLA (cost of living) increases.
The obvious question, raised by Rand Paul yesterday, is that should “better-off” seniors be means tested even now, if already retired, to continue receiving benefits. This does get into the question of “who sacrifices” but some seniors could work – or maybe not. Read Michelle Singletary’s Washington Post “Color of Money” column, “Delaying retirement might not improve your financial prospects” on that today here .
Here’s the rub. SSA ought to calculate and present the percentage of anyone’s benefit actually accounted for by their own FICA (or a spouse’s FICA) “annuity premiums”. (SSA might have to spend money on the contracting services of a couple of accounting firms to do this.) It could be possible to reduce benefits to those seniors who are better off to that amount now – but it gets complicated when you consider the effect of early retirement (promoted by employers who downsize older employees into packages predicated on the social security offset) – because early retirement already has a slight “longevity” penalty built in. Further, it could be complicated by the ‘trust fund” issue, as touted by Rand Paul and others in the GOP. I don’t think this can be done by Aug. 2.
In Medicare, there are so many saving to be made by ditching "fee for service" that one does not know where to begin.