As someone who is constantly researching retirement, I find the recent funding cuts to military retirees very disheartening. Worse yet, I see this as a move to establish ground zero for the testing of changes to Social Security benefits.
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On Wednesday, the Senate passed a bipartisan budget that scales back cost of living adjustments for working age military retirees starting in 2015. Several sources including Military.com suggests that qualified participants could lose between $3,700 and $6,200 per year, or an aggregate between $83,000 and $124,000 before they retire based on rank, age and years of service.
Despite some protests, a few web articles, and assorted angry Facebook posts from former military personnel, it’s pretty much a done deal. The message seems clear: if you’re young (under the age of 62) and capable there will be no perks for you.
Whether you support the decision or not, the rapid process by which these benefits were stripped and seemingly limited public and media anger, may just be setting the stage for related actions within the Social Security program. It’s well documented that the Social Security fund is set to go bust by 2033, with some experts suggesting it could happen sooner. Whether it’s ten, fifteen or even twenty years away, that insolvency date needs to change for the system to survive, and the logical and now accepted way to do it is on the backs of those who can, and already are paying into the system.
Similar to military retirees’ cuts, expect changes to Social Security to happen quickly, with politicians explaining the bad news in percentages and the good news in dollars and cents. For example, on the campaign trail, the candidate’s message to military families is that this is just a small, simple 1% cut for a few years. However, when touting their leadership in deficit cutting and spending reduction, it’s portrayed as part of an important two-year, trillion-dollar deal.
No one, however, talks about how military families may have to earn and/or save an extra $308 a month for the next ten or fifteen years to make up for the reduction. The same will hold true for those impacted by potential future cuts to Social Security. It’s likely those under the age of 62, will suffer only a miniscule cut to benefits (probably less than 1%) and a minor change to the age at which they become eligible for benefits (a few years). But you can bet these trillions -dollar changes will equate to campaign accolades and additional terms for politicians, earned simply by transferring their spending problems onto future generations. I don’t expect to see much shared sacrifice here, particularly because those already receiving benefits make up a healthy percentage of the voter base.
Retirement is quickly becoming a time marked by broken promises. My advice to individuals and couples of every age group is to be proactive about their their plans and be sure to build in contingencies that may take into account potentially major changes to their pension, benefits, Social Security, and healthcare.
It’s the new retirement normal to assume the worst, and then subtract another 2-3% from your potential retirement savings and income.
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