Pension Matters

State Employees Retirement Fund
Most Recent Market Value | Michigan Treasury Bureau of Investments

November 2017

Medicare Out of Pocket Costs Costly

Center for Retirement Research (CRR) Abstract
The adequacy of retirement income — from Social Security benefits and other sources — is substantially reduced by Medicare’s high out-of-pocket (OOP) costs.  This project uses the 2002-2014 Health and Retirement Study to calculate post-OOP benefit ratios, defined as the share of either Social Security benefits or total income available for non-medical spending.

The paper found that:

  • Average OOP spending (excluding long-term care) was $4,274 per year in 2014, with approximately two-thirds ($2,965) spent on premiums.
  • In 2014, the average retiree had only 65.7 percent of his Social Security benefits remaining after OOP spending and only 82.2 percent of total income.
  • Nearly one-fifth (18 percent) of retirees had less than 50 percent of their 2014 Social Security income remaining after OOP spending, with 6 percent of retirees falling below 50 percent of total income.
  • Post-OOP benefit ratios increased concurrently with the introduction of Medicare Part D for retirees who lacked prescription drug coverage prior to 2006. This group also saw a small increase after the donut hole began closing in 2010.

More Than 401K needed for Retirement

Another survey from CRR demonstrates that 401(k) plans are destined to fail millions of Americans. They’re not offered by enough employers, they’re not taken up by enough workers, and for most people, their balances aren’t large enough to provide for a decent retirement.

All these factors weigh most heavily on middle- and lower-income workers, the segment in which the participation rate and balance accumulation are disproportionately low. See the research paper at

A Final Answer on SSA COLA

Monthly Social Security and Supplemental Security Income (SSI) benefits for more than 66 million Americans will increase 2.0 percent in 2018, according to the Social Security Administration recent announcement. The 2.0 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 61 million Social Security beneficiaries in January 2018. Increased payments to more than 8 million SSI beneficiaries will begin on December 29, 2017. (Note: some people receive both Social Security and SSI benefits) The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics.

Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $128,700 from $127,200. Of the estimated 175 million workers who will pay Social Security taxes in 2018, about 12 million will pay more because of the increase in the taxable maximum.

Information about Medicare changes for 2018, when announced, will be available at

The Social Security Act provides for how the COLA is calculated. To read more, please visit

Yeah Michigan

States are falling further behind in the money they owe public employee pension funds, leaving taxpayers on the hook, according to the latest analysis from S&P Global Ratings, which tracks state debts.

Despite recent stock market gains, state governments are not setting aside enough money to keep up with the rising liability of paying public worker pensions and other retirement benefits, according to the latest data.

In all but two states (Michigan and Alabama), the money set aside as a share of what’s needed fell last year to an average ratio of 68 percent. That means most states have funded just 68 cents for every dollar they owe in future payments. Read More at

Protecting Your Social Security Information in the Wake of Breaches

First, it was Equifax in the news, then it was Yahoo hitting the media airwaves, and who can forget Target’s revelations? Now, even fast food chain Sonic has joined the parade. From all that’s been reported, it’s pretty clear that our financial information is not only vulnerable, but poorly protected. Syndicated columnist Michelle Singletary suggests that “When it comes to money, one of the scariest things happening right now is the insecurity of our financial information.”

What to do about it, especially with respect to your Social Security benefits? Ms. Singletary advocates that everyone establish a “my Social Security” account via the SSA website as a means to secure that portal to your personal information. But there’s a bit of a conundrum here, too, in that Social Security uses a third-party “identity services provider” (believe it or not, it’s Equifax) as part of the set-up process, and if you’ve already frozen your credit files (as many folks have) Social Security has no way to electronically confirm your information. But don’t despair, you can still accomplish the account set-up process by visiting your local office in person. Read Ms. Singletary’s article here for more information…

In addition, AARP advises:

Leave it Home. Never carry your Social Security card — what if your wallet or purse is stolen? The same goes for your Medicare card (which includes your Social), unless you’re seeing a health care provider for the first time. If you like the security of having an ID on you, carry a photocopy of your Medicare card with several digits blanked out. 

When Asked, Don’t Tell. Only a few organizations have a legal right to your Social — your employer, banks and lenders, investment funds, the IRS and government-funded programs such as workers’ compensation. When asked by others, just say no. The more your number is out there, the greater the risk of identity theft.

Guard the Final Four. Although most widely used and shared, the last four digits are in fact the most important to protect. These are truly random and unique; the first five numbers represent when and where your Social Security card was issued. Scammers can get those numbers by knowing your birth date and hometown. So don’t use the last four as a PIN ( Don’t share them in emails. Ask companies to use an alternative identifier.

Now That’s a Pension 

Michigan State Police chief Kriste Kibbey Etue will leave the force with more than a half-million dollars and a $91,920.64 annual pension, according to a state document obtained by The Detroit News in an open records request.

Etue has earned more than $502,000 in extra pension benefits that she could start receiving next year in addition to her six-figure salary, a document from the Department of Technology, Management and Budget shows. Read more at

Are You Middle Class?

The way it’s defined will mean a difference in how the proposed tax cuts affect you. Take a look at this article from USA Today to get an idea of how vague that definition is.

Editor’s note: June Morse may be contacted at or 517-886-9323.

Return to top of page