Update on Social Security and Medicare
The federal government has issued annual updates on the financial soundness of Social Security and Medicare, stating that each government benefit program will run out of money within the next 8 to 16 years or so. Here’s the latest news. For the first time since 1982 the Social Security program’s costs will exceed its income, requiring the use of funds from the program’s $3 trillion trust fund to cover the shortfall. This is happening 3 years earlier than was predicted at the time of last year’s report. The trust fund has grown to its current size in part because there has been more money collected than has been paid out. The excess funds have been added to the trust fund. That may be nearing an end. There are several causes for this. Certainly demographics plays a role. The population continues to age which means there are fewer people paying into Social Security and Medicare via payroll deductions from wages while at the same time there are more people applying for benefits and living longer while receiving those benefits. Last year there were 2.8 workers for every Social Security recipient. 10 years before that
A Family Story of a Different Sort
Most of the stories I write about involve parents helping out their adult children and how that might affect their own finances, especially when they need long term care. As a result of divorce, losing a job, having special needs that restricts or prevents the ability to earn a living, an adult child often needs financial assistance or may need to live/move back in with aging parents. This has an impact on the parents’ finances especially if they must consider qualifying for Medicaid. But, what if the situation reverses itself? What if the parents have had enough? What if an adult child refuses to leave the home and refuses to seek employment but would rather continue to look to his/her parents for support? What rights do each of the parties have? In upstate New York, parents went to court seeking to evict their 30 year old son from their home. Mark and Christina Rotondo sent their son, Michael several letters asking him to move out and get a job. In an interview explaining himself, Michael said that he was unemployed because he needed to concentrate on being a father to his child rather than focusing on his career, although
Social Security and Student Loans – Part 2
Last week I wrote about Social Security recipients who are delinquent on their student loans, an increasing problem as the population continues to age. For disabled and retired student loan borrowers, if they fall behind on student loan payments Social Security can garnish their checks – hold back an amount to pay down the debt. In reality, however, the amount garnished does little more than cover the fees and interest. 68% of borrowers who have Social Security reduced see none of it pay down their principal amount owed. Is there a way out? A borrower can apply for a financial hardship exemption or reduction. The Department of Education website does not clearly publicize this option, however there is an application form online at www.studentloanborrowerassistance.org. Another option for borrowers is to try to get the loan discharge because they are suffering from a total and permanent disability. A form must be completed and submitted with a document from a doctor certifying that the borrower is totally and permanently disabled. Alternatively, a Social Security Disability or Supplemental Security Income decision is sufficient but there must also be an indication that the Social Security Administration will
Social Security and Student Loans
The rising cost of higher education continues to be a problem. As annual college tuition increases outpace the rate of inflation so does the amount of money borrowed by attendees. Much has been written about the mountain of debt faced by college graduates who once out in the work force struggle to make ends meet on salaries that often do not provide them enough to cover their living expenses and student loan repayment obligations. Others want to start a family or buy a home and are restricted by having to make monthly student loan payments that amount to what is already the equivalent of a mortgage. But what about disabled and retired student loan borrowers? There are tens of thousands of seniors and disabled student loan borrowers who have fallen behind on repaying their loans. Student loans are not easily dischargeable in bankruptcy as are other loans. The result is that more Social Security recipients are caught in the student loan collection process. Social Security benefits can be garnished to pay back outstanding student loans. This means that a portion of a Social Security recipient’s benefits can be deducted to pay back these
Lack of Verification – Worse than a Medicaid Penalty (Part 2)
In last week’s post, I was talking about how Medicaid eligibility hinges in large part on the State’s scrutiny of 5 years of records under Medicaid’s look back period. Transfers of money out of the applicant’s accounts for less than fair value trigger a Medicaid penalty or waiting period for benefits. Clients and their families are very focused on whether a penalty will result because they understand that means they’ll need to cover the additional costs of care. But, documenting the money flowing into the applicant’s accounts is as important if not more so. That’s because failing to explain where money deposited into an account came from will result in a denial of the application for what’s called lack of verification. Let’s say there is a $1,000 deposit into Mom’s account that occurred 1 year before the application was filed. The State will want us to prove where the money came from. Their thinking is that maybe there is another financial account that Mom owns that we didn’t tell them about. And what if there is no such additional account that can be located? It doesn’t matter to the State. As
Lack of Verification – Worse than a Medicaid Penalty? Part 1
Whenever we are preparing to file a Medicaid application on behalf of a client we closely examine the 5 years of records that we will need to provide to the State together with the 16 page application. Those records include every statement for every asset the client owned in the 5 years directly preceding the month we want Medicaid benefits to begin. As I explain to my clients, we are looking at what the Medicaid caseworker will be scrutinizing – money going into the client’s accounts and money leaving those accounts. Money leaving the accounts – whether by check, electronic transfer, cash withdrawal etc. – is important because Medicaid wants to determine whether the applicant received something of equal fair market value back in product or service. If he/she did not, then the uncompensated transfer is subject to a Medicaid penalty. When I explain how the penalty works most people understand very quickly how that can negatively impact the applicant and his/her family. The penalty is actually a waiting period for benefits. If I am in a nursing home and spent down to $2000, but I have transferred $50,000 in the past 5