Means-Assessed Medicare and Social Security

‘Do you think Social Security will even be around when I am at retirement age?”.

A very, very, very common question that I get.

And while I don’t know, I sure hope so for our society’s sake.

I am beginning to lean in the direction that it’ll be means-assessed. What do I mean by ‘means-assessed’? That it’ll be based on your ability, or means, to take care of yourself with your own assets instead of relying on social security or medicare, neither of which are currently means-based.

If someone, say, has $10 million in assets, should they receive the same level of medicare or social security as someone who is less able to pay their own way through retirement?

A very loaded question, for sure, with no easy answers.

However, given the magnitude of obligations the Baby Boomer generation will require from these programs requires us to take a look at whether or not means-assessment should start to be factored for program qualification.

I suspect it won’t hurt (well, the concept kind of hurts) to anticipate this change for anyone who is an upper income earner or has a balance sheet that is expected to provide upper income in retirement.

And if you aren’t sobered by this ¬†yet, remember that if you are an income earner > $106,800 in 2011 (but $110,100 in 2012), your Social Security tax (6.2%) starts up again January 1.

Yes, the maximum income limit keeps creeping up.

However one offset, at least mentally, is that 401(k) contribution limits have increased for 2012 from $16,500 to $17,000.

Some solace. Small, but still, some.