When one advisor told her client that she may have to work longer than she intended, at a job that she really didn’t like, the client was dismayed. She knew she had meager savings stashed away in an IRA, but she had been counting on her
News stories predicting the demise of
But there are also experts who say that rumors of the program’s death have been greatly exaggerated. They argue that
If advisors genuinely doubt Social Security’s ability to pay promised benefits, they should be discounting those benefits in recommending savings and investment programs to clients. But if they’re wrong to worry, and
That’s taking a lot of money off the table when planning for most people’s retirement needs. The average
A LITTLE TWEAKING
LEARNING FROM THE PAST
“In 1983, Social Security’s funding was up against a wall. It was within a year of running out of money, which would have meant benefits would have to be paid just from the money coming in from the payroll tax of current workers.”
Korn adds, “I’m confident
Peter Diamond, emeritus professor at MIT and Nobel laureate in economics, has, together with a colleague,
Diamond acknowledges the system does need some Congressional tinkering, but says a solution needn’t be that costly or disruptive. Among the suggestions the two have made:
- Raising the FICA tax by 1.2% on employers and employees each, a small bump which would fully fund
Social Securityfor the next 75 years.
- Raising or eliminating the cap on income subject to the payroll tax—currently set at
$118,500and adjusted annually.
- Raising the full retirement age slightly to account for increases in longevity.
- Lowering benefits slightly for wealthier Americans.
The important thing is that the sooner
In terms of how advisors should deal with the issue of Social Security’s future benefits, he says, “Anyone who would significantly discount the value of estimated
THE BEST ROI
Kitces agrees, saying that simply waiting until 70 to collect can be “the best long-term return money can buy.”
Indeed, for an average middle-class person age 66 with
As BlackRock’s Kron notes, to the extent that
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