ELECTION 2024

As the election cycle picks up, retirement policy remains front of mind for many policy makers.  With both Social Security and Medicare long term financing at risk, you should expect to hear big promises on the campaign trail and lots of activity in Washington along the way.

How This Impacts Your Members

99% of your members will enroll in Social Security and Medicare when they retire.  Social Security is your members largest retirement asset, their only source of lifetime/ inflation protected income and a 25+ year direct deposit stream for the credit union.  Medicare is members largest cost in retirement ($300k for a couple, excluding long term care) and the stakes are high. 1 wrong decision can lead to a lifetime of penalties and burdensome healthcare expenses.

#1 Social Security

We all agree that Social Security needs to be reformed to ensure long term solvency.  The question is how to do this (eg who pays). 

Some of the key proposals include:

• Eliminating State/ Federal Taxation of SSA: Several proposals are on the Hill right now to eliminate both state and federal taxation of Social Security.  Many retirees are surprised when they learn Social Security is taxed.  If the tax is eliminated, SSA will have to make up these funds from other places...
• Delaying Full Retirement Date:  Over the years the definition of 'full retirement date', the age when you are eligible for 100% of your benefit, has been delayed.  Currently age 67, one way for Social Security to increase solvency is to delay full retirement date.  This may be viewed unfavorably by soon to be retirees, particularly those in labor related jobs.
• Increasing Earnings Cap:  Another way to increase solvency is to increase the amount of workers salaries that is subject to Social Security tax.  Today earnings above $160,200 are not subject to the 6.2% (12.4% when including employer tax) but there are several proposals to increase the taxes on higher income earners.
• Modernizing Benefit Calculations: Current Social Security calculations discourage part time work in retirement.  They also provide inequitable outcomes when couples divorce and don't provide family caregivers with earnings credits.  

This week Reps. Angie Craig, D-Minn., and Yadira Caraveo, D-Colo., introduced new legislation called the You Earned It, You Keep It Act.  The Act proposes extending the Social Security lifeline by 20 years by increasing taxes on high earning workers and simultaneously removing the federal taxation of Social Security.

Why should credit unions care about Social Security?

99% of your members will enroll in Social Security and Medicare when they retire.  Social Security is your members largest retirement asset, their only source of lifetime and inflation protected income.  Its also a 25+ year direct deposit stream for the credit union.

What our data shows

Your female members are disadvantaged by these 1920s policies.  They have 20% lower Social Security benefits and 9 year lower retirement scores.. yet will live 5+ years longer than male partners.  If your female members age into poverty we have a multi-generational problem.

#2 Medicare

You might think that the Medicare tax in your paycheck covers your healthcare costs in retirement.  But the reality is that members are spending $500+ per month (per person) to get full Medicare coverage.  This adds up to over $300k over the course of retirement.  Reform is needed to cap the costs and ensure that members are guided to the right medicare policy for them.

• Prescription Drug Reforms: The restructuring of the Medicare Part D drug benefit is expected to lower drug costs for millions of Medicare recipients, and cap annual out-of-pocket costs at $2,000 per person in 2025 for those with Medicare Part D.
• Medicare Marketing Reforms: Members are aggressively sold Medicare policies.  Medicare has several proposals outstanding to reform Medicare marketing policies, including eliminating marketing subsidies from carriers to agents (which risk promoting policies that pay agents higher commissions).  Increased transparency and clear commission schedules is essential for members to get unbiased advice.

What our data shows: Members are desperately seeking to be educated on Medicare. They want to be educated, not sold/. As one member recently shared with us:  “The Medicare component of retirement is even more confusing than Social Security. There are people willing to tell you their pitch on that, but they’re all salespeople. I don’t know that I’ve found any independent analysis of what’s best to look for."  - Tom, 63 y.o. credit union member