STAGE 1--DRAWING ON THE EXPERIENCE OF OTHERS 

By Ron Iverson, Copyright 2007

Following are examples of drawing on the experience of others--misconceptions which caused problems.  Knowing the problems ahead of time, will help provide information to those seeking solutions in this series of articles in the blueprint. 

Experience Example No. 3:  "Social Security seems to have worked in the past, but what about the future?"

You will, however, have to pay attention to the plan, and the changes in the plan, keep up with the latest, and keep yourself informed.  First of all, remember that Social Security was designed to be a "safety net"--only one part--along with pensions and savings--of the original three-legged stool of retirement.  It was never intended to be the only element to retirement survival.  Unfortunately, many people have viewed it that way.  The trick is not to depend on Social Security, for anything more than a base plateau, one of the parts, or legs of successful retirement.

Social Security is an "entitlement program."  Sweet and simple--but with the word "entitlement" being misunderstood.  Here's what it means.  For several years you paid into Social Security.  Therefore, when you are ready to retire, you are "entitled" to take out.  For others, it may mean that somebody paid in for them, then died, so their beneficiaries, maybe age related, are entitled to take out.  It's just that simple.  Social Security "entitlement" means that after years of paying into a "Social Insurance System," one of the benefits is to receive (to be entitled to) take out retirement money.

As a prospective retiree, and Social Security recipient, it probably won't surprise you to know that the program represents the largest single source of income for typical retirees.  Social Security provides more than half of all income for nearly two-thirds of the recipients.  Put yourself into this picture and see if you are comfortable.  If you are not, your concerns are not about Social Security, but about the other legs of the stool. 

Another indication that Social Security is heavily relied on, is that nearly three-fourths of today's retirees are opting for early Social Security retirement (age 62) benefits.  Even staying employed, and returning half the income on a "two for one" basis, does not seem to deter recipients. 

Think about this--for twenty percent of recipients, Social Security is their only source of income.  Nobody's getting rich on Social security, but for many, it means survival, with the average benefit being about $11,200 per year.  So, if you are counting on Social Security to be the flagship of retirement income, your thoughts should move to it being regarded as "secondary income."  You are kidding yourself, if you feel that any kind of "comfortable" living will be afforded by what will amount to a "bare bones" subsistance, during a time that inflation in general, and health care and personal care costs begin to rear their heads.

Experiance Example No. 4:  "Our savings are being eaten up by inflation and Medical costs.  What's all this talk about Medicare going broke?"

Inflation in health care costs has been a number one irritant to all Americans, not just retirees.  In fact, health care costs are rising much faster than inflation in general, particularly in the prescription drug market.  The rise in the cost of health care nationally has run from 6 to 12 percent annually for nearly a decade, and no hopeful decrease is in sight.  But for the retiree, especially those who have lost group health plans which covered the number one cost--prescription drugs--this issue is not a comfortable one.  When we add extended longevity to the mix, the cost of health care far into the future may be very unpleasant.

As in the Social Security discussion above, you need to know that Medicare is an "entitlement program."  Pay in, and you are entitled to take out.  However, since the "Golden Years" really have very little to do with a guarantee of feeling good, Medicare must be counted on, for every American retiree.  Medicare will likely see serious revision, even after the "reforms" of 2003.  It does no good to anticipate how reform will come about--additional reform is imminent, and will be done on a continual basis. 

Reform amounts to one simple thing.  Dollars.  Where do they come from?  One source will undoubtedly be continual increases in Medicare premiums for retirees, as well as taxpayers, and an increase in the beneficiary's supplemental products as deductibles and coinsurances go up.  Count on that--Today--and plan on it for tomorrow. 

Even with the addition of Medicare Part D, Prescription Drugs, the benefits of the program are expensive--when premiums, deductibles, co-pays, and the donut-hole are all added together--for most Americans.  Those beneficiaries (dual eligibles), who qualify for some "extra help" programs--available through Medicaid--are in a better position. Millions of retired Americans will be forced to seek this help as Prescription Drugs costs continue to soar in.  

Medicare has burdened itself with some impossible promises made during the first five years of this century.  The expectations of Medicare are totally reliant upon taxpayer and recipient dollars, and without major overhaul, the system sustaining 76 million people will be far different than the one currently sustaining 40 million retired recipients.  Stay tuned-you may not like the music-but you certainly will be hearing it.

In Article No. 8, we will continue with the Experience Examples of others in a short discussion of Nursing Home (Long Term Care) costs and Pension problems.