What The “Fiscal Cliff” Agreement Means To Retirees

Written by: David Wilkening

If youre at all like me, you sometimes wish our wishy-washy lawmakers in Washington would themselves jump off a real cliff. Instead, the gang that couldn’t shoot straight managed behind closed doors to reach an agreement forestalling many of the dire predictions of what would happen if no agreement had been reached.

But what does the fiscal cliff agreement mean for us seniors or those on Social Security?

For one thing, we can all breathe a little easier. For now, at least.

It was generally taken for granted that a major agreement would include cuts in retirement Social Security.That did not happen. Ultimately Democrats cared more about avoiding spending cuts than securing tax revenues, and Republicans cared more about low taxes than cutting spending. Old people are the winners, writes Slate.

As for proposed Medicare reimbursement rates for physicians that were scheduled by law, the deal put off any movement there- at least for the immediate future.

The US Congress essentially reached a deal to extend most of the Bush tax cuts and levy Clinton-era rates on incomes of $450,000 for households. The sequester cuts agreed to as part of the 2011 deal on the debt ceiling will be delayed for two months and perhaps ultimately replaced by some other package, says Slate.

And theres the rub, of course.

There are various proposals floating around for changing Social Security to help reduce the looming deficit, which will have to be dealt with in the future. Lawmakers accustomed to wooing popularity at election time will in the future be very reluctant to cut current benefits, according to most commentators.

But those who are not yet retired but are nearly there will certainly want to pay close attention to the next round of Congressional talks. Since Social Security was created, thelife expectancyfor 65-year-olds has increased by more than three years. But the age for full benefits is being increased by only two years from 65 to 67 in 2027, according to Slate. Retirees under current law could still take reduced benefits at earlier ages.

The latest deal amounts to adding almost $4 trillion to the deficit over the next decade. The Congressional quick fix that shamelessly was done behind closed doors with little public debate and which left no time for lawmakers to take a serious look at what they are doing (what else is new in Washington these days?) means the issue will come up again when all entitlement programs will be under the gun.

So its easy to guess what might likely happen. Money could be saved by simply raising the retirement age to reflect future increases in how long retirees are expected to live.

That is only one of several options being considered such as changing the formula for benefits or switching how cost-of-living adjustments are calculated.

So will future retirees have to wait longer to quit and collect their Social Security? Will overall benefits decrease for those already retired?

The best guess is that current retirees will not be impacted. But its only a guess. Who knows what can happen when the US Congress is in session? Was it Mark Twain who said no ones life, liberty or pursuit of happiness is safe when that happens? Retirees may live longer these days but they are also not safe, either.


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