Are you depressed that youâ€™ve hit the big 55? Maybe the old joints are aching a bit? Well take your Prozac and conjointin and be happy that youâ€™re now old enough to be spared from retirement benefit cuts.
Or are you? Maybe not. Yes, 55 has always seemed to be a magic number. For example, Congressman Paul Ryanâ€™s budget blueprint, passed by House Republicans earlier this month, would end the government run Medicare program as we know it and raise the age for Medicare eligibilityâ€”but only for those born in 1957 or later. In other words, those turning 55 this year would be spared.Â And most proposals to raise the Social Security â€œfullâ€ retirement age, such as the one from President Obamaâ€™s deficit commission, generally donâ€™t affect those born in 1960 or before. (Thatâ€™s partly, however, because an increase in the retirement age is already built into the law for those born in 1955 through 1960.)
But take a look at whatâ€™s happening in Michigan, where Republican Governor Rick Snyder originally proposed raising $900 million to fund corporate tax cuts by eliminating the Â stateâ€™s generous exemptions for pension income. Currently, residents 59-and-a-half or older are exempt from Michiganâ€™s flat 4.35% income tax on up to $90,240 per couple ($45,120 per single) in pension income, including IRA account withdrawals. Thatâ€™s in addition to an exemption for all Social Security benefits.
The Republicans who control Michiganâ€™s State House and Senate (or at least their older constituents) were not amused. So GOP leaders have worked out a compromise deal with Snyder. Residents who will be 67 by Jan. 1, 2012, will continue to get the current break. Those aged 60 to 66 as of next Jan. 1, will get an exemption of $40,000 per couple, $20,000 per single, for income from any source. Those still 59 or younger as of Jan. 1 will also get a $40,000 per couple/$20,000 per single break too, but not until they turn 67. (In all cases, Social Security benefits and military pensions would remain tax exempt. Terms of the deal are here.) The Michigan AARP is fighting any changes and the Associated Press reported today that itâ€™s still unclear whether Republican leaders have the votes to pass the pension tax change, which is opposed by Democrats. But the fact remains that 50 somethings were awarded no special treatment in this compromise.
Then thereâ€™s Democratic controlled Hawaii, where the legislature is considering curbing tax breaks for retirees regardless of age, although in this liberal state the limits are likely to apply only to those with income above say $200,000 per couple.Â And note that one change Obamaâ€™s deficit commission pr0posedâ€“shaving the annual cost of living adjustment for Social Security recipientsâ€“would affect beneficiaries of all ages.
The bottom line: Those of a certain age are certainly more likely to be protected or â€œgrandfatheredâ€ when cuts are made. But these days, there are no guaranteesâ€“even for real grandfathers and grandmothers.