Lita Epstein - The Complete Idiot's Guide to Social Security And Medicare

When I was 20, it seemed to be common knowledge that Social Security was going to be out of money by the time I retired, so I never put much thought into how the system worked. If the "benefits" were never going to affect me, why did I need to spend time trying to understand it? Well, my father-in-law will be able to start collecting in a couple of years, and I wanted to make sure I could explain to him how much to expect. I also have to explain to seniors every year why they end up having to pay tax on their Social Security benefits. I picked up Lita Epstein's book, The Complete Idiot's Guide to Social Security And Medicare, in hopes of understanding the Social Security system better.

This book is organized into 6 Parts, each comprised of 3-4 chapters. They are:

Part 1: Hatching the Nest Egg
This section gives a history of the Social Security program and an introduction to the current benefits available.

Part 2: Getting Your Share
This section explains in detail all the ways to receive Social Security benefits, how to qualify and collect, and how to decide when to start collecting benefits.

Part 3: Cracking Open Your Nest Egg
Here, Epstein goes into detail on how major life changes (death, divorce, disability) affect Social Security.

Part 4: Living Right
This is a valuable section for people entering retirement, discussing how to live on a fixed income, the effects of going back to work, and the tax consequences of collecting Social Security benefits.

Part 5: Staying Healthy
This section covers everything about Medicare.

Part 6: What's Next for the Nest Egg
These chapters discuss the financial crisis these two programs are in and possible solutions to the crisis.

Interspersed throughout the book, Epstein includes little boxes with definitions of key words, pitfalls and problems, interesting tidbits and tips on how to navigate through the system.

My Take
I found this book to be very interesting, particularly the history section. There are some good trivia tidbits there. For example, when the program originated, the Social Security Board had to implement the program in an age before computers and the Internet. In order to get the Social Security Numbers applied for and issued by the deadline the Board was given, they called on the US Postal Service to help. Since there were post offices all over the country, they were the most accessible location for the public, so the mail carriers also administered the first Social Security Numbers.

Epstein was pretty thorough in her explanation of the expected Social Security shortfall when the Baby Boomers retire. Since this edition was published in 2006, her statistics are a bit outdated yet still relevant. In 2004 the Social Security program received $658 billion in income and paid out $510 billion in benefits, leaving a pretty nice surplus. In 1999, Congress passed a bill making a "lockbox" to hold the surplus. However, Congress has been able to skirt around that provision when passing later legislation. Since the terrorist attacks of 9/11, a lot of the Social Security surplus has been used to pay for the wars the U.S. has been involved in, the damage from hurricane Katrina, and for all the other costs the Bush tax cuts are not paying for. Reading about this really frustrated me because in a sense lawmakers were lowering taxes to boost their popularity, while at the same time effectively robbing a great number of Americans of retirement income they have paid into for decades.

Epstein uses examples to explain the various formulas used to calculate Social Security benefits in a relatively simplistic manner. For people who are not math-minded, it will probably still be a little confusing, but that's mainly because the methods themselves are a little involved. This gave me a good idea of how to explain to my father-in-law how much to expect (something I am not looking forward to, as he will be quite disappointed).

I didn't realize before reading this how many different ways there were to collect Social Security benefits. Other than widow's, surviving children's and disability benefits, you can collect benefits for one or more former spouses. Epstein gives a lot of advice as to what steps to take when it's time to start collecting, and how different decisions (such as marriage) can affect your benefits. Many times it is not beneficial for senior citizens to remarry after becoming widowed because remarriage can drastically reduce their benefits. So much for being aloud to find love after loss.

The medicare section was very informative, but since I didn't pick up the book looking for that information, I didn't spend a lot of time there.

The last section of the book deals with the debate over whether or not to privatize Social Security benefits in order to keep the system alive. On of the main arguments for privatizing Social Security is that it would allow individuals to determine how aggressively they want their retirement savings to grow. A major argument against it is that privatization could be very risky because a dive in the market can adversely affect how much money one has in the fund. That kind of takes the "security" out of "Social Security." Another argument against privatization is that the costs to implement and manage the program will be high. In this respect, most of the costs will go to fatten the wallets of the investment companies.

To illustrate the effects of privatization, Epstein gives stats of how it has worked in other countries. In Chile, employers were required to give their employees raises of 18% in order to cover the money the employees were required to pay into their private Social Security funds. In 1997, 570 thousand private pensions in the UK were under investigation for misrepresentation to buyers.

While there is no short and sweet answer to the Social Security crisis, Epstein provides readers with a lot of information on both sides of the fence, although it seems like she definitely leans more to one side.

Lita Epstein has an MBA, is a former congressional press secretary and a financial writer, so the Complete Idiot's decision makers felt confident that she was a good choice to write this entry to their popular guides. Given the thoroughness she gives the subject and her ability to write in a straightforward, simplified style, I'd say they were right.