Entitlements is a four-letter word (to some)

I personally hate talking in generalities – that said, Republicans, generally, look at Entitlements almost like a handout – almost like Government welfare and for the government to remain solvent, something radical needs to be done with Entitlements.

Democrats, on the other hand, are not much better on the subject – they are willing to cave into Republican demands for major reform to both Social Security and Medicare.

Please do not get me wrong – even though I am registered Democrat who never votes straight ticket, I am just as distrustful of the Democrats on this issue as I am the Republicans.

All of us have been paying into Social Security all our working lives – we did not have a choice. Our government basically said, we are worried about your future and we will take your money and be the caretaker of it for YOU, and it will be there when you need it.

No one in the government ever said that there would EVER be someone in the government who would evaluate your finances down the road and tell you that you do not need any of the money you have been giving to the government for them to watch over for you. My personal opinion is that millionaires and billionaires who have paid into Social Security and Medicare through their payroll deductions are ALSO entitled to receiving their money down the road. If should be their choice to be benevolent and give that money to the needy or to a charitable organization.

Whoever pays into Social Security is entitled to receive it down the road. PERIOD.

There are discussions about reducing the amount of money that will be “funded” for use by the Medicare system each year and that confuses me.

Before anyone in Congress, the White House, or the Social Security Administration considers cutting payouts to citizens who paid into the system, it is IMPERATIVE that all of these organizations go after the fraud and abuse in the system. If any health care organizations or providers or medical equipment manufactures are abusing the system, the government should not only get that money back, but they should prosecute the abusers – set an example and that will help stop the abuse of the system.

There are discussions about raising the minimum age to be eligible for Social Security. Currently one can start drawing reduced Social Security payments at 62, while full benefits age was raised from 65 to 67.

There are exceptions to the age criteria listed above regarding a person drawing Social Security at the earliest age and when that person is eligible for Medicare and that depends on a person having certain disabilities before 65 or people of any age with End-Stage Renal Disease (ESRD) (permanent kidney failure requiring dialysis or a kidney transplant). Note: Please do not take the above ages and medical conditions as gospel – to get accurate data you need to check with the Social Security Administration. (Continued in next post)

Now, regarding early application for Social Security. This was changed because there were many people who lost their job as they got older and could not find suitable work, so the government started offering people to file early but to do so, the monthly amount turned out to be lower than a person would receive at 65 (now 67) because the person would be receiving monthly payments for 3 – 5 years longer – hence the lower monthly payments.

Now, here is the Catch-22, so to speak.

Congress, mostly the Republican side of the House wants to again raise the age – and it might go from 67 to maybe 70 and who knows, early retirement might go up at well.

The problem with this kind of change is that American companies have been “forcing out” older workers because they are too expensive – so companies have been quietly letting people go when they are in their 50’s – many companies told these aging workers that they just had to reduce the workforce to cut costs.

Unfortunately, this turned out to be one big fat lie. I worked for several companies in the 80’s and 90’s that let a lot of “older” software professionals go and then these companies when to colleges – or at times even Spring Break beach resorts and recruited college students – and before the desks and chairs were cold from the mass exodus of the employees being let go – young wippersnappers were filling those same exact cubicles somewhere between 40% and 60% of the wages the older workers were making.

So, if that was the case in the 80’s, 90’s and the 2000’s, what will happen in the next decade or two?

When companies pull this stunt again, these unemployed older employees will have to wait up to 5 more years before being eligible to draw Social Security.

So, what will that mean?

Years ago, many companies had defined benefit plans, which means the companies put money aside from their profits that would be available for their employees when they retired.

Over the past 20 – 30 years, companies realized that represented a significant amount of money and they no longer wanted to do that. So, they figured out a way for employees to defer some of their paycheck into 401-k’s so that employees were investing some of their salary into their retirement fund. The companies, in an effort to induce employees doing this, agreed to match some or all of the money up to a certain amount. You could defer up to maybe 15 percent of your salary (tax deferred) and your employer could match from NOTHING up to a max of 6 percent.

I knew many people, especially younger employees, who jumped at the chance of defering 15 percent – especially with a company that was matching another 6 percent.

The reason why younger employeees jumped at this is because they were not homeowners and tended to not have kids – so they were not paying college bills. Middle age workers were mostly homeowners and/or had kids nearing college age and they had to worry about college tuition.

So, how will all this be affected by raising the minimum Social Security age upward another 5 years? When companies turn up the heat and again dump middle age employees, there will be NO vested retirement and it will be too many years to wait to be eligible for Social Security. So what will happen? Just to exist, they will have to burn through all their 401-k money to pay their monthly expenses and their medical bills. Unless there is a radical change to lower the medicare age, health issues will drain middle age people of all their assets.

This is a no win for middle income Americans.

Again, the very rich will not be adversely affected.