New Yorkers and Americans nationwide may face cuts to their Social Security and Medicare payments because the programs could be headed for insolvency in the coming decades. Those depending on the payments may need to rethink not only their retirement plan but also their living will and estate planning because less assistance from the program means more out-of-pocket expenses during retirement.
The government announced that Social Security will be insolvent by 2033 and Medicare will run dry by 2024 without further changes. The programs are running short because they have been giving out more than they take in. Both are funded through payroll tax. However, the cost of energy has kept incomes low, and Americans are expected to work fewer hours in the future.
Millions of retiring baby boomers also add to the problem. Currently, 56 million people rely on Social Security, and Medicare covers 50 million people. Calls for reform acknowledge concern for future beneficiaries.
Many beneficiaries are facing the general challenges of estate planning. In the past, families were able to rely on Social Security benefits and Medicare as a form of retirement benefits. Although most Americans are entitled to these benefits, it's important to save through other avenues as well.
Estate planning may involve creating a will or a trust. Creating a will or a trust involves plenty of planning and the execution of the documents themselves. This is an important process that requires experienced assistance.
An estate planning advocate can even help create family limited partnerships or other legal entities that can lower the tax burden. Either way, all of these tools are useful and will benefit the estate regardless of the condition of the Social Security program.
Most Americans are weary of holding out for Social Security benefits. The eligibility ages may need to be raised and smaller payments made to those who are entitled. Proper estate planning now can avoid the reliance on a system that may not be around when a person is in need.
It's important to take personal responsibility for estate planning needs. Leaving this decision to politicians may be a disastrous mistake for individuals and families.
Source: Associated Press, "Social Security heading for insolvency even faster," Ricardo Alonso-Zalvidar, April 24, 2012