Is This High Tide for Senior Finances?

Key safety net programs under pressure as budget deficits, health-reform changes threaten benefits.


For people using Social Security and Medicare, today may some day be remembered fondly as the high-water mark of these benefit programs. And as the financial pressure for reduced support mounts, it would be wise to step back and see what your next five to 10 years would look like if the values of these benefits declined by five or even ten percent. The odds of such a steep decline are slight but so were the chances that housing and investment markets would take a double swan dive of historic proportions. This is the time to think about such matters, not when they're already here, staring you in the face.

[See Why Retirement Spending Is More Art Than Science.] Our senior safety net programs have been working really well. Much about government policy can be faulted but Uncle Sam has done a terrific job in looking out for the financial security of older Americans. You may not feel so fortunate personally. The past two years have been rough. Even if you weathered them in good shape, it's hard to stay upbeat in the maelstrom of aggressive unhappiness that spews forth from cable TV. But the facts say that seniors have been faring well.

Last week, the U.S. Census Bureau released its 2008 assessment of national income, poverty and health-insurance coverage. As you might expect, the steep recession took a toll in all three areas. Income for the median household fell 3.6 percent last year from 2007 levels, poverty rates hit a 12-year high and more people were without health insurance.

But for people 65 and older, the picture was different. The median income for that group actually rose 1.2 percent last year. Seniors were the only group whose income did rise—a pretty amazing achievement during the worst downturn since the Great Depression. Poverty? The poverty rate among those 65 and older stayed at 9.7 percent, while the average for the country was rising to 13.2 percent in 2008 from 12.7 percent in 2007. In 1959, before Medicare, poverty among older Americans was more than 35 percent, significantly higher than for other age groups. Today, older Americans are half as likely to live in poverty as children under the age of 18. I don't know about you, but that comparison distresses me.

[See Poor Social Security Knowledge Has Big Costs.]

And on the insurance front, of course, Medicare and Medicaid pretty much guarantee that being uninsured among those 65 and up is a random event due more to paperwork problems than the inability to qualify for insurance. If you're an older citizen of the United States, universal access to healthcare has become a given.

But as President Obama gears up again for a major push to enact healthcare reform, it's hardly lost on people that Medicare and Medicaid deficits must be reined in. If we can find ways to ultimately deliver better healthcare for fewer dollars, please tell me how we get there without making certain types of care and medication more costly for seniors to obtain. At least in the short run, the only way to restrain costs is through some combination of lower government outlays and higher private-sector payments.

After a 5.8 percent annual cost of living boost to Social Security recipients in 2009—the largest in more than 25 years—the government has now projected that the rate of inflation in the general economy is so low that there will be no upward adjustments in either 2010 or 2011. With many healthcare costs projected to continue rising by upwards of 10 percent, the share of senior incomes needed to meet insurance and out-of-pocket healthcare costs will certainly increase as well.

[See Double-Digit Medical Expense Trend to Continue.]