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As a Biden supporter in general, and fully believing seniors deserve the dignity of having the not-so-luxurious benefits of dental, vision, and hearing care, informed people have long known that means testing was coming for SS & MC. Even more so that they are considering adding new benefits (dental, visions, hearing) – it takes the wind out of the sails of the argument that “I’ve paid into this program, and I deserve all the benefits and shouldn’t be punished for earning a lot or having saved a lot.”
It makes little difference if this is handled by rejecting coverage or charging higher premiums for those that can afford it. The only argument I’ve heard from my beloved Democrats is that it would cost a lot to implement such a plan. The devil is in the details: is it based on last year’s income or accumulated wealth. I’d advocate that either option should trigger the spoiler. Also, what level can we all agree on is “fair”. If one makes $500,000 of adjusted gross income (AGI), that’s easy. What about $100,000? That’s a lot to most people, but if you happen to be unfortunate enough to not have your home paid for, or live in a high cost of living state, or help out your struggling children, $100,000 doesn’t go as far as you might think.
Basing it on wealth is much more attractive in the abstract. If you’re worth $3,000,000 and collecting SS, one could hardly make the case you can’t afford to pay for your own dental, vision, and hearing care. But in practice, it can be much harder to measure wealth since that data is not as readily available as your tax return. Sure, the value of your brokerage and IRA accounts are easy for the IRS to track, but what about the value of a closely-held non-publicly traded business. Or the equity in your home. I would not advocate forcing people in retirement to take out a mortgage or having to sell – unless there is an outsized pile of cash to be made. Again, difficult to draw the line.
Means testing, higher age to attain full benefits, and the elimination of cost of living adjustments are the primary variables for bolstering Social Security Retirement and Medicare benefits. Our elected representatives need to act on these important issues before it becomes a crisis.
Yes, to #1 and #2 – not sure I’d agree with $3. Although it would certainly have the effect of sustaining payments, it’s just not fair to eliminate COLAs especially since you are statistically likely to live another 20 years for men or 23 for women if age 62; 20 years for men or 23 for women if age 65; 18 and 18 if age 65; and 17 years for men or 19 for women if age 67. So, at a modest 3% rate of inflation, you lose about half your purchasing power after 10 years and nearly half after 20.
Lifting the cap on earnings subjected to the SS tax is also a legitimate possibility, or at least increasing it by maybe double. The idea that you won’t get out of it what you’ve paid into it is a fiction long ago abandoned. It’s always been a tax that some people that result in some winners and some losers. Consider the significant number of people who die before or soon after retirement – oftentimes leaving behind no spouse of child beneficiaries to collect. Their entire contributions (and those of their employers’ matching), are lost – or more accurately, used to prop up the winners.
Also worth pointing out that means testing for SS has effectively been in place for the last 37 years – that’s when a portion of your SS benefits first became taxable. The portion of your benefits subject to taxation varies with income level. You’ll be taxed on: up to 50 percent of your benefits if your income is $25,000 to $34,000 for an individual or $32,000 to $44,000 for a married couple filing jointly. and up to 85 percent of your benefits if your income is more than $34,000 (individual) or $44,000 (couple). Source AARP. Also, MC premiums are variable depending on income level.
How refreshing to see all the comments. Insightful, intelligent and respectful – seems like the IBJ of old!
Payments for Medicare coverage are already somewhat based on income. One’s past year’s income as taken from tax documents is used to calculate the amount paid for Medicare, Part B.