Monday, January 16, 2017

Social Security Full Retirement Age Moves Higher this Year

What is Full Retirement Age?
Why is Full Retirement Age Important?
How is Full Retirement Age Changing in 2017?
Were you born after January 1, 1955? If so, you should be aware that the Social Security Full Retirement Age is increasing starting this year. This impacts your benefits – and not in a good way.
Full retirement age (FRA) is the age at which a worker first becomes entitled to full (unreduced) retirement benefits. 
Workers can claim benefits early, once they reach age 62. But if you claim before your FRA, you receive permanently reduced benefits. On the other hand, if you wait until after your FRA to begin your claim, your benefits will be increased through what are called delayed retirement credits. This means that the longer you wait (up to age 70), the more you will eventually receive each month. The reduction (or increase) in benefits is permanent: it will continue for the remainder of your life.
To understand how this works, see my earlier blog post: Claiming Social Security Retirement Too Early can be a Big Mistake.
For many years the FRA was age 65. However, because people were living longer, Congress wrote gradual increases in the age into the law. For workers born between 1938 through 1943 the FRA increased in two-month increments for each successive birth year. For workers born between 1944 and 1954, the FRA held steady at age 66. But for people born in 1955 and after it increases again in two-month increments each year until it reaches age 67 (for workers born in 1960 or later).
This means that workers who turn 62 in 2022 or later will be subject to an FRA of 67. The chart below illustrates these changes.
The earliest age at which workers may start to receive reduced retirement benefits remains 62; however, benefit reductions at that age will be larger for workers whose FRA is higher. For example, workers born in 1954 (whose FRA is 66) receive a permanent 25 percent reduction in their monthly benefit amount if they claim benefits at age 62 rather than at the FRA. However, workers born in 1960 (whose FRA is 67) will receive a 30 percent benefit reduction if they claim benefits at 62.
In other words, an increase in you FRA reduces your lifetime benefits regardless of the age at which you initially claim benefits. The percentage of the reduction depends on the age at which you choose to claim benefits. To raise your monthly benefit you can delay claiming until a later age, but that means you will receive benefits for fewer years.   
It’s quite possible that the FRA will be increased again for younger workers. One way Congress could improve the long term financial stability of Social Security would be to raise the retirement age to 68. The Congressional Budget Office estimates that a one-year increase in the FRA would shrink federal Social Security outlays by 7 percent by 2046 compared to what would occur under current law. Note that any such additional increase in the FRA would probably only be applied to younger workers, not those close to retirement.

Age To Receive Full Social Security Benefits 
(Called "full retirement age" or "normal retirement age.")
1937 or earlier65
193865 and 2 months
193965 and 4 months
194065 and 6 months
194165 and 8 months
194265 and 10 months
195566 and 2 months
195666 and 4 months
195766 and 6 months
195866 and 8 months
195966 and 10 months
1960 and later67
*If you were born on January 1st of any year you should refer to the previous year. (If you were born on the 1st of the month, we figure your benefit (and your full retirement age) as if your birthday was in the previous month.)

Further Reading

Sunday, January 8, 2017

Nursing Home Residents Gain More Control Of Their Care

Last September I wrote about the Federal Government’s update and reform of its regulation of long-term care facilities. See, “Government Updates Nursing Home Regulations.”
In my prior posting I focused on the controversial sections limiting the use of arbitration agreements in nursing facility admission contracts. That aspect of the new rule is currently in limbo due to a lawsuit brought by the nursing home industry.
But the updated nursing home regulations span a much broader landscape as they attempt to improve the quality of life and care for nursing home residents.
Here is an article published recently by Kaiser Health News that discusses some of the other changes being advanced under the new rule. It is republished here with permission of Kaiser Health News.
By Susan Jaffe January 4, 2017
About 1.4 million residents of nursing homes across the country now can be more involved in their care under the most wide-ranging revision of federal rules for such facilities in 25 years.
The changes reflect a shift toward more “person-centered care,” including requirements for speedy care plans, more flexibility and variety in meals and snacks, greater review of a person’s drug regimen, better security, improved grievance procedures and scrutiny of involuntary discharges.
“With proper implementation and enforcement, this could really transform a resident’s experience of a nursing home,” said Robyn Grant, director of public policy and advocacy for the Consumer Voice, a national group that advocates for residents’ rights.
The federal Medicare and Medicaid programs pay for most of the nation’s nursing home care — roughly $75 billion in 2014 — and in return, facilities must comply with government rules. The new regulations, proposed late last year by Health and Human Services Secretary Sylvia Mathews Burwell, take effect in three phases. The first kicked in in November.
They allow residents and their families “to be much more engaged in the design of their care plan and the design of their discharge plans,” said David Gifford, a senior vice president at the American Health Care Association, which represents nearly 12,000 long-term-care facilities.
Grant goes even farther, saying the new approach puts “the consumer in the driver’s seat.” Until now, she noted, a person’s care has too often been decided only by the nursing home staff. “And if the resident is lucky, he or she is informed about what that care will entail, what will specifically be done and who will do it.”
HHS reviewed nearly 10,000 comments on its draft proposal before finalizing changes. One controversial measure in the department’s final rule would prohibit nursing homes from requiring residents to agree in advance to have any disputes settled through a privately run arbitration process instead of the court system. The industry association objected, claiming that Medicare officials have authority only to regulate matters related to residents’ health and safety and that an individual’s rights to use arbitration cannot be restricted. The ban is on hold until the association’s lawsuit, to force the government to drop the provision, is decided.
Here are highlights of the requirements now in effect:
Making the nursing home feel more like home: The regulations say that residents are entitled to “alternative meals and snacks … at non-traditional times or outside of scheduled meal times.” Residents can also choose their roommates, which may lead to siblings or same-sex couples being together. And a resident also has “a right to receive visitors of his or her choosing at the time of his or her choosing,” as long as it doesn’t impose on another resident’s rights.
Bolstering grievance procedures: Nursing homes must now appoint an official who will handle complaints and follow a strengthened grievance process. Decisions must be in writing.
Challenging discharges: Residents can no longer be discharged while appealing the discharge. They cannot be discharged for non-payment if they have applied for Medicaid or other insurance, are waiting for a payment decision or appeal a claim denial.
If a nursing home refuses to accept a resident who wants to return from a hospital stay, the resident can appeal the decision. Also, residents who enter the hospital have a right to return to their same room, if it is available.
A state’s long-term-care ombudsman must now get copies of any involuntary discharges so the situation can be reviewed as soon as possible.
Expanding protection from abuse: The definition of abuse now includes financial exploitation. Nursing homes are prohibited from hiring any licensed professional who has received a disciplinary action because of abuse, neglect, mistreatment or financial exploitation of residents.
Ensuring a qualified staff: Consumer groups had urged federal officials to set minimum staffing levels for registered nurses and nursing staff, but the industry had opposed any mandates and none was included in the final rule. Instead, facilities must have enough skilled and competent staff to meet residents’ needs. There are also specific training requirements for caring for residents with dementia and for preventing elder abuse.
“Competency and staffing levels are not mutually exclusive,” said Toby Edelman, a senior policy attorney at the Center for Medicare Advocacy. Person-centered care and other improvements “don’t mean anything if you don’t have the staff who know the residents … and can figure out why Mrs. Smith is screaming.”

Yet, requiring a certain number of nurses could backfire, said Gifford. “It could actually result in places that are above those ratios lowering their staffing levels and other places that would increase staffing when they don’t need it and could be putting their resources into better care to meet the needs of the residents.”

Thursday, January 5, 2017

Medical Deduction Threshold for Seniors Increases

There are new maximum deduction amounts for long-term care insurance premiums for 2017. Policyholders over 70 can potentially deduct up to $5,110 in premiums. But the 2017 threshold for deducting these and other medical expenses has increased from 7.5% to 10% of adjusted gross income for taxpayers over age 65.
Here is a recent article on this subject written by my colleague, Elizabeth White, CELA*
The IRS has issued new maximum deduction amounts for long-term care insurance premiums for 2017. It is important for long-term care insurance policy holders to be aware that at least a portion of the premiums paid for qualified long-term care insurance policies may fall under the medical expense deduction. However, seniors must also understand that the medical deduction threshold for those over 65 years old has increased for the 2017 tax year.
The maximum amount that a policyholder can deduct for payment of long-term care insurance premiums on his or her income taxes is indexed for inflation as calculated each year by the IRS. The amount that is deductible may not be the full amount of the premiums paid. Additionally, like other medical expense deductions, this is available only to those who choose to itemize deductions and is subject to the medical deduction threshold.
The amount that is deductible is based upon the policyholder’s age, and rises for an older individual. Any amount paid above the IRS limit is not deductible as a medical expense.
In 2017, a person who is 40 years old or younger has a maximum deduction of $410.00. Someone between the ages of 40 and 50 can take a maximum deduction of $770.00. A 60 through 70 year old can deduct a maximum of $4,090 next year. Policyholders over 70 can deduct up to $5,110 in premiums on his or her income tax return.
When determining the maximum premium amount that is deductible, as with other medical expense deductions, long-term care insurance premiums fall under the medical expense deduction threshold, sometimes referred to as a floor. In 2016, and for some years prior to that, those over the age of 65 could deduct medical expenses at a lower threshold of above 7.5% of his or her adjusted gross income. However, the threshold has increased for medical costs to 10% of adjusted gross income for all filers starting in 2017.
As an example, let’s look at Bob, a 71 year old who had an adjusted income of $50,000.00 a year. Bob has $8,000.00 in medical expenses, which includes $6,000.00 in qualified long-term insurance premiums paid in 2017.
While Bob can use all of his qualified medical expenses, including his long-term care insurance premium, his resulting tax deduction is only for total qualifying medical expenses above and beyond the 10% floor of his adjusted gross income. In other words, Bob needs qualifying medical expenses exceeding $5,000.00 a year to take the medical deduction, and then only his qualifying expenses in excess of that $5,000.00 can be deducted.
Bob would have $2,110.00 in deductible medical expenses:
$5,110.00 maximum long term- care insurance premium deduction      2017   +        $2,000.00 in other medical expenses
=        $7,110.00 allowable medical expenses
$7,110.00 allowable medical expenses
  • $5,000.00 floor
=        $2,110.00 in deductible medical expenses
Contrast this with 2016 where Bob has a 7.5% floor, which would allow for deductions over and above $3,750.00 a year. In 2016 with the same income and medical expenses, and a long-term care insurance maximum deduction maximum of $4,870.00, Bob would have $3,120.00 in allowable medical deductions.
In 2016, Bob would have $3,120.00 ($1,010.00 more than 2017) in deductible medical expenses:
$4,870.00 maximum long-term care insurance premium deduction 2016
+        $2,000.00 in other medical expenses
=        $6,870.00 allowable medical expenses
$6,870.00 allowable medical expenses
  • $3,750.00 floor
=        $3,120.00 in deductible medical expenses
It is important to have a team of professionals that can work together for you to determine what is best for your long-term care needs, income tax situation, and estate planning wishes. At Marshall, Parker & Weber our attorneys welcome working with your financial advisor and accountant to develop a multidisciplinary plan that works best for you.
*Elizabeth White has been Certified as an Elder Law Attorney (CELA) by the National Elder Law Foundation.

Sunday, January 1, 2017

A plan to deal with aging

It’s 2017. Another year has disappeared into history. If you are like me, the older you get, the more quickly each year seems to pass.
January is the month when people make resolutions for the New Year. If you are over age 60, and especially if you have reached age 70 (like me), consider this to be a great time to resolve to put together a plan for dealing with the realities of aging.
Of course, we all have some differences in our specific situations and concerns. But none of us can avoid aging and most of us need to address common questions like:
1)    Are my financial resources sufficient for the rest of my life? What can I do to maximize and protect them?
2)    If (or more likely when) I fall prey to disability who will step in for me:
a.     Who will pay my bills and manage my financial resources?
b.    Who will make decisions about my care?
c.     How do I make sure that my caregivers have the power they need to provide for me?
3)    What can I do to limit placing financial and personal burdens on my family?
4)    How can I avoid financial devastation if my spouse or I get sick and need care for a long time?
5)    How can I best provide for my family in the event of my disability or death? Who will get what I own when I die? My family? The government? Who should be in charge?   
6)    What kinds of care do I want to receive at the end of my life?
In putting together your plan, recognize the possibility that you may live a very long life. According to data compiled by the Social Security Administration:
    A man reaching age 70 today can expect to live, on average, until age 85.4.
    A woman turning age 70 today can expect to live, on average, until age 87.5.
And those are just averages. Social Security estimates that about one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95. And given the remarkable advances we are seeing in medicine, genetics, and robotics, the Social Security estimates may be much too conservative.
So we all need to plan for the issues that can arise from an extended life span. This includes the likelihood that we will eventually face one or more disabilities and require long-term caregiver support. The reality is that most people who are age 85 and older do have some disability and need some assistance in their daily lives.
At age 65 the chances we will need care support at some point during our remaining lives is 70%. A large percentage of us (40%) will need care support for over 2 years. The financial costs and personal burdens placed on care-giving families can be substantial. But, you can create a strategy now to protect yourself and your family from these costs and burdens.
To put together a good strategic plan for aging you are going to need the help of experts in financial planning and elder law. The good news is, the help you need is available.  You just need to be willing to seek it out. An elder law attorney can help you find and implement the best solutions to critical legal, financial and care planning issues. 
Key Documents in Planning for Aging
Here are some of the planning documents that are often included as components of an effective plan for aging.
Financial Power of Attorney - This critical document allows a trusted agent of your choosing to step in to pay your bills and manage your financial affairs in the event you can no longer do so. You need to make sure you choose the right person. Don't neglect to name a backup in case your first choice can't serve. 
You may want to notify your financial advisors and institutions of your choice in advance. If a financial institution has its own “in-house” power of attorney form, you may want to complete it as a supplement to your primary document. And make sure your chosen agent knows how to get access to the financial information he or she will need when they have to step in.  
A financial power of attorney is a very sophisticated and complicated document. This is not something to take lightly or buy online. You need to make certain that your agent has the powers required to protect you and your family and that those powers are consistent with your personal situation and goals. 
Seek expert guidance to create a document that has the provisions you and your agent will need.
Health Care Directives - These documents allow you to give directions regarding the kinds of care you want to receive in the event you become incapacitated. They allow you to designate the person(s) you want to be making health and personal care decisions for you. If you already have a living will with instructions for end of life care you need to recognize that having a living will is not sufficient. You need to plan for living as well as dying. The key planning document you need is a Health Care Power of Attorney.
Will - this is a document that says who gets what when you die. It also names someone to be in charge of finalizing your affairs. It can be used to create trusts and protect your beneficiaries. But, many people don’t realize that they have created other documents that can trump the provisions of their Will. These include trusts, life insurance, annuities and other investments with beneficiary designations, and joint ownership arrangements. If you become incapacitated you may not be able to change the terms of your Will and beneficiary documents. So, it is wise to have your Will and beneficiary designations reviewed and updated as needed as you have your aging plan prepared.
Trust – this is a document that can be used to provide for management of some of the investments and other things that you own. Trusts can be very useful tools in planning for aging. Special forms of trust can allow you to set aside a home or savings to be protected in the event you or your spouse encounter serious and expensive health and long term care costs later in your life.  
Quality Advice: As Important as Your Documents
The above documents are important components of your aging plan. But a good plan requires more than just having legal documents prepared. You also need to put a well thought out strategy in place.
People often don't appreciate the complexity of planning for aging and dealing with issues like long term care. It is imperative that you get the highest quality advice in putting together your plan. Be sure to talk with a lawyer who is a recognized expert in elder law. If you live in Pennsylvania, you can call my law firm, Marshall, Parker and Weber and set up an initial meeting. You can consult with one of our firm’s 3 lawyers who have achieved the distinction of having become certified as specialists in elder law by the National Elder Law Foundation and the Pennsylvania Supreme Court. 
The likelihood that your goals will be achieved depends largely on how good a plan you put in place. The quality of the advice you get in putting together your plan and documents is critical to protecting you and your family. Don’t be penny wise and dollar foolish when your security and your family’s future are at stake. Don’t try to do it yourself or seek unqualified assistance. You and your family may pay dearly for your mistakes.    
Bottom Line: If you are over 60, this winter is an excellent time to recognize that the years are going to continue to rush by. And that the best time to prepare for your aging self is right now.  
Further Reading:

Want to know your life expectancy? Social Security has a simple Calculator that gives a rough estimate of how long you (or your spouse) may live.