Kansas & Missouri Estate Planning

Social Security’s Rule 11-1p – Catch 22?

According to a recent press release out of the Digital Journal, the Social Security Administration has been changing some of its rules, and that may portend a tougher time for those applying for Social Security Disability (SSD) or Supplemental Security Income (SSI) benefits.

According to the Social Security Administration's (SSA) 11-1p rule, formerly it was possible to have multiple filings for the same benefits. And that's a pretty useful ability when your first filing is denied and it has to be appealed. Why? Because then you can file an entirely new claim and wait for either the new claim or the appealed claim to come back. You kinda hedge your bets.

Anyone who has tried knows that waiting for an appeal can take an awfully long time (and during that time you likely are in need of those benefits). Of course, 11-1p is the rule that's been flipped and now you can't have two filings for the same benefit. As a result, you will need to choose between waiting out the appeals process (or letting it drop) and then filing an entirely different one.

Using the appeal track alone might cost you that much more time, and simply filing again will mean that you'll miss out on back-benefits (for the time you were waiting), if the appeal would have gone through.

It's an unfortunate position to be in and, if nothing else, it highlights the need to file with the SSA correctly the first run through.

Reference: Digital Journal (December 1, 2011) "New SSA Rule Disallows Multiple Benefits Applications"

Decision-Making Ability Declines, As Birthdays Increase

Why do many of the most difficult decisions we face come later in life? I guess it's just fact of life. Unfortunately, we're not always at the top of our game when those decisions must be made. Therefore, it's essential to make proper plans earlier, rather than later.

According to a recent study, reported on here by the Wall Street Journal, the decline starts around age 60. The scores on a test measuring knowledge of investments, insurance, credit and money basics fell about 2% each year starting after age 60. In fact, they fell from about 59% correct for those in their 60s to a dismal 30% for those 80 and older.

What'’s almost as bad? These very people actually grew more confident in their decisions and knowledge!

Problem: These are the very same people who are attempting to sift through the messy and confusing programs like Medicare and Social Security, at the very same time they are undergoing this dramatic change in their mental agility. These also are the people who will want to take care of their loved ones in their estate plans in an era of constantly changing laws and regulations.

If you are the child of older parents, this is something to bear in mind when seeking to help them, perhaps especially when your assistance is unwanted. Likewise, as a parent, fact of life will necessitate a bit of self-understanding. And for everyone, this means that proper estate planning means getting it done earlier, rather than later.

Reference: The Wall Street Journal (October 30, 2011) "Financial Acumen Declines After 60"

COLA I$ Going UP In 2012!

COLA is going up? No, not that "cola" (or even the "uncola," if you are old enough to remember that ad campaign). After two years without an increase, Social Security recipients will get a cost-of-living adjustment of 3.6 percent in 2012.

Although it's been two years since Social Security beneficiaries saw a bump in benefits to offset rising inflation, they will see a COLA increase for 2012, with an adjustment of 3.6%.

The COLA, or Cost Of Living Adjustment, it intended to keep benefits consistent with inflation. Without their COLA, many seniors would be at the mercy of rising prices on fixed incomes. Lean times in the national economy, however, have meant cutting back COLA for the past two years. This has led seniors with no choice but to further tighten their belts.

The 3.6% increase will be warmly received by many. For example, beneficiaries receiving $1,186 a month, the average for retired workers, will see monthly benefit increase of $43.

While it's not a dramatic increase (and less than the last COLA of 5.8%), any increase in COLA is better than no increase at all, especially for low income seniors.

Reference: AARP (October 19, 2011) "Social Security Beneficiaries Welcome 3.6 Percent COLA"

Budget Cuts: To Affect Nursing Home Costs (And Services)?

If you have a loved one in a nursing home now or in the near future, then be ready to pay more and, perhaps, receive fewer services due to tightening Medicare and Medicaid budgets. In fact, you may notice an uptick in your "house bill" as early as this fall.

The last few months have been a wild ride on multiple financial levels. This include wild financial consequences at the micro level (e.g., putting gas in your tank and buying milk) and at the macro level (e.g., future funding of Social Security, Medicare, Medicaid and the very real "debt crisis"). While many more challenges lie ahead in terms of budget cuts, some cuts already have been made... albeit under the radar screen.

Several of the budget cuts you should know about actually go into effect this fall, as reported in a recent SmartMoney article. According to SmartMoney, nursing home residents could face higher costs or reduced care once these cuts kick in. Yikes!

On July 29, The Centers for Medicare and Medicaid Services (CMS) decided and announced that they would be compensating for last year's $4 billion shortfall by cutting reimbursement rates to nursing homes by 11.1%. In real terms, the shortfall will reduce government reimbursements to nursing homes. In 2010, nursing homes across the board increased charges on residents by an average of 5%.

The bad news: These reduced government reimbursements likely will trigger even higher nursing home costs for residents beginning this fall. Alternatively, it might trigger a reduction in services to nursing home residents. Either way, the forecast is not pleasant.

Perhaps I am wrong. Perhaps nursing home residents won't see increases in costs or decreases in services. After all, the CMS actually justifies the 11.1% cut by pointing out that it is simply a more accurate reimbursement amount based on a government report indicating that Medicare has been overpaying. In fact, as a spokesperson for the CMS maintains, "We do not believe that nursing homes will respond to the payment changes by decreasing the quality of care furnished to patients. However, we intend to carefully monitor changes in utilization and staffing patterns to ensure that patients continue to receive high quality care."

Still, the nursing home industry appears to be monitoring the situation with caution. Bottom line: If you have a loved one in a nursing home, then you, too, should take notice.

Reference: SmartMoney (August 18, 2011) "Medicare Cuts Could Up Nursing Home Costs"

Debt Deal: The "Fix" Is (Not) In

What would happen to you or to me, if we ran our household budgets like the U.S. Government? Chances are good we would end up with "three hots and a cot" (and likely a roommate or two, not of our own selection). It is sad, really. No, pitiful. Actually, there are not adequate (publishable) words to describe the collective lack of stewardship by our elected officials over the years and in both political parties.

Okay, so the debt deal passed. As I mentioned last week, it's already been called a mixed bag by AARP, but the bad may outweigh the good and there are specific changes to watch with interest. Robert Powell of MarketWatch has put together another resource detailing what you ought to know with a special emphasis on budget cuts on programs (both the $1 trillion already going into affect and future cuts to Medicare), along with interest rates and taxes.

Regardless, it's quickly proving to be a vital time to take stock of the situation and prepare. Luckily, the financial news is awash with important reminders and advice about what's at stake, now and down the road.

Immediately following on the heels of the debt deal, however, the S&P downgraded the U.S. and forced a rather volatile "market correction." As SmartMoney points out in this article, it's like 2008 all over again, because it's the baby-boomers who have the most to lose and must taken action to engage strategies to protect their nest egg.

And, finally, there's looking to the future… the future of rehashing the past few months and the debt debate. The deal that was reached calls for the commissioning of a "super committee" to make more suggestions for cutting the debt. That means Medicare and Social Security might not remain safe, since the debate isn't actually over. Indeed, if the super committee's suggestions are not implemented, then immediate spending cuts to Medicare will go into affect by Christmas. Reuter's, for one, thinks there's reason enough to be wary of the super committee altogether, especially if you're concerned about retirement (not to mention the transparency of the legislative process). In fact, they've found eight reasons to worry.

In the meantime, each of us is responsible for the good stewardship of our own resources on a daily basis. Teaching point: When you go into the voting booth in November of 2012, remember to exercise good stewardship by electing a like-minded chief executive and representatives. There is simply too much at stake this time around.

Reference: MarketWatch (August 4, 2011) "How the Debt Deal Will Affect Retirees"

                  SmartMoney (August 8, 2011) "The 2011 Correction: Another Bad Turn for Boomers."

                  Reuters Money (August 5, 2011) "8 ways the super committee is not super for retirement"

The Debt And Seniors: Done Deal?

Most Americans, as well as the world at large, were keeping more than just an interested eye on the recent debt deal (or debacle). Note: I will refrain from writing what I really feel about it because: 1. What goes on the internet stays there forever; and 2. I don't want to confirm for any future lineal descendants that such words were even in my vocabulary (as in "I didn't know great-grandpa Krull was a sailor!" kind of words). Therefore, let's take a look at what the debt deal means to seniors, as far as we can tell.

In short, the deficit deal passed by Congress and signed by President Obama is a mixed bag for older Americans. From all appearances, Social Security and Medicaid will be protected from cuts (at least for the time being), but many other federal programs are likely to be trimmed.

For months we've been trying to figure out what Congress would do about the debt ceiling, and how their actions would affect the nation's seniors. While the recent debt deal neither raises taxes nor make cuts to Social Security or Medicare, it does lay the future groundwork for renewed discussions as the national debt continues to swell. It is not a matter of if it will pop, but when.

The AARP says the deal is mixed bag for older Americans, but not as bad as it might have been. Proposed cuts to Social Security and Medicare did not make it into the final bill. Of note, too, is that the proposed changes for calculating the Social Security Cost Of Living Adjustment (COLA) – a less generous formula that effectively cuts the benefit – did not make it into the final bill either. However, to preserve these programs, other programs were necessarily reduced. No one has yet to locate the money tree.

Nevertheless, the debt discussion was not put to rest, merely put on hold. One of the biggest results of the law is to create a congressional super-committee of six Democrats and six Republicans who must make significant budgetary recommendations by late November. By Christmas-time this year, Congress must act on these recommendations, find a better solution, or else cuts will go into effect across both national defense (one of the few enumerated constitutional functions of the federal government) and add-on entitlements, like Medicare and Social Security.

Bottom line: The debt crisis has been postponed rather than resolved. When it comes to national priorities, the traditional question has been "guns or butter." At present, we have money for neither... other than what we can borrow.

Reference: AARP (August 2, 2011) "Debt Deal: No New Taxes and No Social Security or Medicare Cuts – Yet"

COLA: More Than Just A Soft Drink?

The Cost of Living Allowance (COLA) component of Social Security is getting another look. No, it is not going to disappear, but the method by which it is calculated may change to reflect marketplace realities. Think of it this way: Rather than increase COLA based upon name-brand goods and services like Coca-Cola, base the COLA increases on the prices of (and increase in prices to) the generic, store brand alternative to Coca-Cola.

It looks like the debt debate in Washington may require a lot more belt-tightening for all Americans, including seniors. One change proposed by both sides of Congress and White House officials, elaborated in this SmartMoney article, is to adjust the "measurement" of inflation used when determining the COLA.

Inflation is a fairly common concept – the general and expected upward creep of costs – but economists are less certain about the most appropriate measurement. Currently, costs of products are tracked across various economic sectors and inflation is seen in terms as a percentage increase in those products. However, economists argue that when product costs rise, the first response of consumers is to switch to similar but cheaper products.

As a result, the actual affect of increased prices is mitigated by consumer choice. When a brand name product becomes too expensive people buy the generic alternative, and do so for any product that they can switch out, thus keeping costs relatively stable. The suggestion is to use a model of inflation that takes this replacement approach into account based on all adult consumption. Result: COLA would shrink.

Under this proposed approach, the annual COLA would grow 0.3% less, and so the overall Social Security payouts would decline over the beneficiary's lifetime. For example, the average retiree would see his or her benefits cut by some $18,000 over 25 years. The risk: Many seniors already are cash-strapped, so they will need to make up that lost $18,000 elsewhere to make ends meet... or do without. To make matters worse, seniors tend to switch-out products less than other adults. Why? Largely because they already are buying the bare essentials and the generic store brand products. As a result, seniors are less flexible in their spending habits.

Many experts worry that the proposed COLA adjustment will leave many seniors in dire straits. If you were counting on Social Security as a large part of your retirement security – as many are – you may want to start learning more about those extreme couponing schemes, or check out the generic product section at your local grocery store.

Reference:  SmartMoney (July 13, 2011) "Coming Soon: Smaller Raises for Seniors?"