Social Security Debate Heats Up

For those who are reaching the age when Social Security matters, generally age 65, 66 and above, the latest arguments about the program are hardly re-assuring.

In basic terms there are several debates going on at once.

First there’s the question of when benefits should occur; that is, what is “full retirement” age. The Social Security Administration has a list of ages and full-retirement benchmarks, retirement dates which currently run between age 65 and age 67.

But, there’s now a proposal to raise the full-retirement age to 70.

House Minority Leader John Boehner (R-OH) told the Pittsburgh Tribune-Review that he would like to see the retirement age increased to 70 — but only for people who will not retire for at least another 20 years. Such an extension would reduce financial strains on the system, but is age 70 the new 65?

The initial reaction to Boehner’s suggestion was both hot and heated for the most part, but think of it as the first shot for a change which is more modest, say making the new full-retirement benchmark age 67.5 or 68. Financial necessity as well as demographic realities may make such a change inevitable. Moreover, the general increase in the full retirement standard from age 65 to 67 serves as a precedent that can be followed with limited political liability — especially if the change is deferred for several years.

Privatization

What’s far more controversial is the idea of sacking Social Security altogether. No one says that outright of course, but that’s precisely what’s meant by “privatizing” the system.

The idea would be to dump Social Security in exchange for accounts invested in the stock market. This would be great for Wall Street — think fees — and likely great for stock values — think of more dollars chasing a relatively small number of stock issues. However, not everyone wins with the stock market. It’s foreordained that large numbers of seniors would not see stock market profits and dividends which would be sufficient to support them in old age. How such individuals would fare without the safety net of Social Security is unknown — and very unappealing.

Reverse Mortgages

In the new world of changing economics, where the US economy is not destined to robustly expand every year and where full employment is less certain than in the past, those who wish to do well in their later years need to supplement government programs with their own savings and investments.

This can be accomplished in large measure with private pensions and various investments. For those with real estate equity, a home can effectively be converted into either a source of monthly income, a lump sum, or with a reverse mortgage a device to pay off an existing mortgage balance. This would end monthly costs for principal and interest — thus increasing the value of income from other sources. Costs for property taxes, insurance and repairs would remain in place.

What’s best for you? There’s no single answer, but look ahead, speak with an attorney who specializes in elder law and consider the use of a fee-only financial planner.

This entry was posted on Wednesday, August 25th, 2010 at 12:55 am and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.