Starting in 2013 newly hired FERS employee’s retirement contributions will increase from .8 percent to 3.1 percent of salary. Originally this was intended to apply to all FERS employees. There is another vote pending in the house that proposes increasing all employees’ contributions by 1.5 percent that will be phased in over a three year period starting in 2013. This same bill eliminates the FERS annuity supplement for the majority of those who retire before age 62. Recently the White House proposed a 1.2 percent contribution increase for all employees twice while the House proposed a 1.5 percent increase. Numerous proposals from the White House and Congress could potentially impact retirement benefits and employee contributions.
The upcoming budget resolution process may further impact federal employees and annuitants. Last year proposals ranged from extending the pay freeze, raising employee retirement contributions even higher, to reducing the federal work force through severe hiring restrictions. With the national debt at 100 percent of our annual Gross Domestic Product (GDP) we may all find uncomfortable times ahead.
Social Security Statements (These may not come your way if the SSA has an incorrect address)
Fran, a SSA employee, replied to my article titled Social Security – When Should I Apply and Replacing a Lost Card  to clarify the issue concerning when you can expect to receive your Social Security Statement. The latest change to the Social Security Administrations (SSA) statement program limited mailings to those age 60 and above. These statements are mailed to the address the IRS has on record. If you don’t get one, consider doing what Fran did. She obtained a copy of the IRS’s 8822 Change of Address (COA) form , completed, and returned it to the specific address listed in the form instructions for your area.
Fran went on to say that the IRS, like SSA, had a data base conversion years ago, which caused statements to go to old addresses. Similarly, but exclusively causing the SSA’s social security number history to be reversed in some cases. Your latest SSA social security number history may have your older information which is known to cause mismatches in the databases. When the IRS, Motor Vehicle Administration, and Social Security have conflicting Bio information it causes e-filing of taxes to reject and driver license renewal problems.
She strongly encourages the next generation to keep their name exactly the same among employers, Federal and State Agencies, and for the 60 plus folks to review their Social Security Statements for possible Date of Birth (DOB), name, and earnings corrections, etc. If you’re 60 and not receiving an annual Social Security statement do as Fran suggests and submit the COA form ASAP.
My wife had a similar problem with this when she applied for Social Security in January. She listed her complete middle name on the application and the Social Security office only had her middle initial on record. They corrected it over the phone and her application was approved.
The Debt Crisis
I received a number of comments about my “Retirees Under Attack”  article. Many are concerned, and rightfully so, about today’s high unemployment, housing, and education costs. Several suggested that I need to have more compassion for all who are struggling.
My frustration is with those who choose to be irresponsible including our government, not those who acted responsible and got caught in the cross fire. All of our investments, our children’s futures, retirement, Medicare, and Social Security are at risk if government doesn’t get its act together and soon. Our national debt is now 100% of our GDP, not far behind Greece’s debt level of 130% of GDP. The government is borrowing 40 cents of every dollar they spend and we can’t continue on this path. The United States is now the largest debtor nation in world history and the debt just keeps mounting each and every day.
The following chart was sent in an email recently and it puts the budget crisis into perspective better than any words I could put down on paper. It shows the scope of the problem and unfortunately the dire straights we find ourselves in today. This chart compares the United States’ financial position to an average American family in plain simple English. The first table lists actual government budget statistics.
- $2,170,000,000,000 – United States Tax Revenue
- $3,820,000,000,000 – Federal Budget
- $1,650,000,000,000 – New Debt (Federal Budget minus Tax Revenue)
- $15,514,000,000,000 – National Debt
- $38,500,000,000 – Recent Budget Cut
Now, remove eight (8) zeros and imagine it’s a household budget as noted below. The title for each entry was changed to a related household category:
- $21,700 – Annual Family Income
- $38,200 – Money the Family Spent
- $16,500 – New credit card debts
- $155,140 – Outstanding Credit Card Balance
- $385 – Total Budget Cuts for Year
This really hit home for me and my wife. How long could a family continue doing this without going bankrupt and insane to boot. Having unmanageable debt would drive me CRAZY. The government knows this is a problem but continues to try and spend its way out of debt.
Imagine having a $100,000 loan and to pay it off you decide it’s best to borrow more each year without substantial payments on the outstanding debt. Have you ever heard of anyone spending their way out of debt? Then, adding insult to injury, the government brags about the huge cuts they made a few months ago! Just how huge do you think the budget cuts were when compared to a typical family financial statement? A drop in the proverbial bucket!
We are truly in a debt crisis. Our government must pass a balanced budget amendment to restore our financial health and ensure future Congressional bodies won’t break the bank. You frequently hear about 10 year budget reduction plans that are passed such as the recent one a few months ago. What they don’t tell you is that after the next election the new congress is not obligated to continue with those plans and often ignores them completely. Only a balanced budget amendment will hold our representatives feet to the fire.
In my opinion we don’t have a revenue problem: we have a chronic spending problem! We need a flat tax where undue influence from lobbyists will become a thing of the past since they won’t be able to seek and obtain preferential tax treatment. There are hundreds of billions in wasteful spending across the board and we must eliminate the fraud, waste, and abuse in all programs. Tort reform is an essential part of the equation as well along with cutting foreign aid dramatically and term limits for our Congressmen and Senators that get too powerful and indignant. It isn’t going to be easy but it is necessary to avoid a collapse like we see in Greece and around the world today.
Recent Forum Host Articles:
- Social Security – When Should I Apply and Replacing a Lost Card  by Dennis Damp
- Pension Survivor Alert – Don’t Let This Happen to You  by Paul Riser, our Financial Planning Forum  Host. This is a must read for anyone who is planning retirement. It relates an unfortunate true story about a couple that suffered because the annuitant didn’t leave a sufficient survivor’s benefit for their spouse.
Request a Retirement Benefits Summary & Analysis  from a local adviser. A sample analysis  is available for your review. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections. This service is not affiliated with www.federalretirement.net.
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The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our article is not intended nor should it be considered investment advice. Our articles and replies are time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.
Last 5 posts by Dennis Damp
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