Bob’s Journal for 3/13

Social Security Is Back in the Headlines

The Social Security program recently received a lot of attention, and none of it was positive.

Last week, the Social Security Administration (SSA) reversed a policy that was initiated last year on the recovery of overpayments to beneficiaries.

SSA always tries to recover overpayments, regardless of who was at fault. It is believed that most overpayments are the result of mistakes by SSA.

Overpayments often are recovered by withholding future benefits, known as a clawback.

For a long time, SSA would clawback as much as 100% of a beneficiary’s monthly payment until the overpayment was recovered.

Last year, SSA decided that policy created hardships for beneficiaries. It set the default clawback rate at 10% of monthly benefits. The rate could be increased or decreased in some circumstances.

Last week, SSA announced it would return to the 100% default clawback rate, saying this was the agency’s duty as stewards of the program. The change is estimated to save the program $7 billion over 10 years.

The policy affects only new overpayments. Existing repayment schedules will be unchanged. A beneficiary who can’t afford the 100% clawback can contact SSA to request a lower rate.

In other news, Elon Musk said that Social Security was a Ponzi scheme, reigniting debate over the program.

Technically, Social Security isn’t a Ponzi scheme, because a Ponzi scheme is a fraud in which investors are lured to participate and then paid nonexistent profits from the investments of later investors.

The details of Social Security are available to anyone who cares to look, so it isn’t a fraud.

Also, everyone is required to participate, so no one is lured into the program.

But the program is poorly designed. Benefits paid weren’t set with regard to the contributions coming into the program and the investment returns earned on those contributions. That’s why the trust fund will run out of money within 10 years.

Social Security is similar to a Ponzi scheme in that current Social Security taxes (contributions) are used to pay benefits to current beneficiaries. Nothing is saved or accumulated for future beneficiaries.

Another similarity to a Ponzi scheme is that early beneficiaries in the program received far more in benefits than they paid in to the program. Current and future beneficiaries are receiving poor returns on their contributions.

Some program supporters believe Musk brought up the Ponzi scheme allegation as part of an effort to build a case to terminate the program. It goes along with his false statements that millions of dead people are receiving monthly benefits.

Also reenforcing that belief is that the Department of Government Efficiency (DOGE) reportedly closed a number of Social Security local offices and laid off thousands of employees. A number of experienced senior SSA employees resigned or took early retirement buyouts.

The DOGE workers have access to Social Security’s database, though it isn’t clear what they’re doing with the information.

There is a concern that the system won’t be able to function without many of the departed employees. There’s worry that people won’t be able to apply for benefits and existing beneficiaries won’t receive payments.

Perhaps all the change and controversy will spur Congress to finally take action and return the program to solvency.

As I’ve said before, I recommend that no one let such headlines cause them to change their strategies by claiming Social Security benefits early.

Claim benefits at the time that is best for your retirement plan. If benefits are cut at some point, it is better that they be cut from a higher level than a lower level.

How to Preserve Family Wealth for Generations

Most of you are aware of the statistics that family fortunes rarely last beyond the second generation.

But some family money does last through the second generation and beyond. In a few families, wealth not only lasts for multiple generations but increases over time.

The big question is how do those families preserve and increase wealth?

A new study found the key is to create processes and procedures, actions the study’s author gives the unattractive name “bureaucratic practices.”

After observing and interviewing a prominent wealth manager, the manager’s clients, and some other wealth managers, the author concluded the bureaucratic practices are the distinctive advantage of the successful families.

Specifically, the families whose wealth lasted multiple generations implemented and maintained practices such as regular meetings of the family, presentations by wealth managers and other experts, and preserving decisions and principles in signed documents.

The study found the practices put bureaucratic form over substance and are imposed on the family’s legal entities, such as corporations, LLCs and trusts.

The successful families did more than transfer wealth. They set up a process of professional socialization that introduced and embedded new behaviors into family life.

What You Should Know About 2025’s Medicare Prescription Drug Rules

The Medicare Part D prescription drug program changed several times in the last few years, leaving many beneficiaries uncertain of the current rules.

To participate in the Part D prescription drug program, a Medicare beneficiary must purchase a Part D prescription drug policy issued by a private insurer or join a Medicare Advantage program that has prescription drug coverage. The policies available, their terms and the premiums charged vary around the country.

The big change for 2025 is the final repeal of the “doughnut hole” (or coverage gap) that was in the program in various iterations since its initiation.

Now, there is a $2,000 annual limit on a beneficiary’s out-of-pocket prescription drug spending. Once an individual spends $2,000 on covered prescription medications for the calendar year, additional prescription costs are covered by the insurer and the government.

One important factor is the $2,000 limit applies only to beneficiaries who have Part D policies or belong to Medicare Advantage plans. Beneficiaries who chose not to participate in one of these will pay for their own prescription medication without a limit imposed by Medicare.

The out-of-pocket limit applies only to prescription drugs and only those medications covered by the Part D policy or Advantage program. Over-the-counter, or nonprescription, drug costs don’t count toward the limit.

Only medications covered under the beneficiary’s Part D policy or Advantage program count toward the limit. Each plan decides which drugs it covers and how much the plan member will pay for each drug until the annual spending limit is reached.

If a medication is prescribed but the beneficiary’s plan doesn’t cover it, then the beneficiary must cover the cost and the expenditure doesn’t count toward the out-of-pocket limit.

Also, sometimes a medication is cheaper through a discount plan (such as GoodRx) than through the Part D policy. If the beneficiary makes the purchase using the discount plan, that cost doesn’t count toward the annual out-of-pocket limit.

Any medications covered by other programs, such as Medicare Part B, also don’t count toward the Part D spending limit.

The Data

The Consumer Price Index (CPI) increased 0.2% in February, down from 0.5% in January. The 12-month increase in the CPI was 2.8% through February and 3.0% through January.

The core CPI (excluding food and energy prices) was up 0.2% in February and 0.4% in January. The core CPI increased 3.1% for the 12 months ending in February and 3.3% through January.

The National Federation of Independent Business (NFIB) Small Business Optimism Index declined another 2.1 points in February to 100.7. That’s the lowest level since October 2024. The NFIB’s Uncertainty Index rose to 104, its second-highest level ever.

Inflation dropped to the second greatest concern of small business owners, falling behind labor quality.

In the fourth quarter, productivity increased 1.5%, according to the final estimate. That’s an improvement from the previous estimate of 1.2% but below the 2.9% increase in the third quarter.

Hourly compensation increased 3.8% in the fourth quarter. The combination of the productivity increase and higher compensation resulted in a 2.2% increase in unit labor costs.

There were 151,000 jobs created in February, according to last week’s Employment Situation reports, an increase from 125,000 in January.

Average hourly earnings increased 0.3% in February and 0.4% in January. The 12-month increase in average hourly earnings was 4.0% through February and 3.9% through January.

The number of job openings in January increased to 7.74 million from 7.508 million in December, according to the JOLTS (Job Openings and Labor Turnover Survey) report. The number of hires, separations and quits all increased in January.

New unemployment claims fell by 21,000 to 221,000 in the latest week.

Continuing claims, which lag a week behind new claims, increased to 1.897 million from 1.855 million.

The Markets

The S&P 500 dropped 3.63% for the week ended with Tuesday’s close. The Dow Jones Industrial Average fell 2.54%. The Russell 2000 lost 2.75%. The All-Country World Index (excluding U.S. stocks) was unchanged. Emerging market equities advanced 1.23%.

Long-term treasuries dropped 1.13% for the week. Investment-grade bonds fell 1.10%. Treasury Inflation-Protected Securities (TIPS) lost 0.54%. High-yield bonds declined 0.89%.

On the currency front, the U.S. dollar dropped 2.08%.

Energy-based commodities decreased 0.18%. Broader-based commodities rose 1.14%. Gold gained 0.05%.

Bob’s News & Updates

A recent review on amazon.com of my latest book said, “Carlson is a unique national Asset while alive! Get the book, dude!” Look for “Retirement Watch: The Essential Guide to Retiring in the 2020s” (Regnery Capital: 2023) at amazon.com, barnesandnoble.com, booksamillion.com, and regnery.com.

My previous book, “Where’s My Money: Secrets to Getting the Most out of Your Social Security,” is receiving mostly five-star reviews on Amazon for telling you clearly what your benefit options are in different situations and how to determine the best choice for you. You can find it on amazon.com or Regnery.com.

The number of regular viewers for my Retirement Watch Spotlight Series continues to increase. You should sign up because I make in-depth presentations of key retirement finance topics. You can watch these online seminars from the comfort of your home or office at times you choose. To learn more about my new Spotlight Series, click here.

A recent five-star review of my book, “The New Rules of Retirement” on amazon.com said, “A complete retirement guide! One of the best books on this topic!” Click for more details about the revised edition of “The New Rules of Retirement.”

If you’re interested in my books, check my amazon.com author’s page.

I’m a senior contributor to the Forbes.com blog. You can view my contributor page here.