Social Security & An Uncertain Future

This is a time of great change and economic uncertainty in America.  With the stock market taking us on a loop-deloop rollercoaster ride, two polar opposite economic philosophies fighting it out in the Halls of Congress, and the passage of huge, high-impact healthcare legislation with consequences that will not be understood clearly for years, the road to financial security has never been riskier.  The good news is that even though we cannot predict the future, we can still prepare for it.  In fact, we must.

One issue that will impact almost everyone in America is Social Security.  Younger workers paying into the system to provide benefits for current retirees may be concerned about the solvency of Social Security and if it will be there when they retire.  Meanwhile, workers at or near retirement are worried about more than benefit freezes or reductions.  One report estimates Social Security will be unable to pay full retirement benefits by 2037.1

Other points to ponder:

• Many people in their 50s are not sure if they will be able to retire … ever.(2)  Plus, 60 percent of non-retirees do not believe they will ever receive Social Security benefits.  They have good reason to be concerned, because the ratio of workers-to-retirees has steadily declined: There may be only two active workers supporting each retiree by 2050.(3)
• For the first time in years, there was no cost of living increase in Social Security benefits in 2010.  It is possible that such freezes may become the norm.
• Retirees depend on their Social Security benefits; the average retiree’s monthly benefit accounts for 40 percent of his or her total retirement income.(4)
• Keep in mind that retirement Social Security benefits are not all that impressive, averaging just $1,170 per month.(5)
• Most retirees are not affluent.  In 2008, the mean annual income for men age 50 and over receiving pensions and/or annuities from private-sector employers was $15,888.  The average for women was $9,700.(6)
• According to the Employee Benefit Research Institute’s Retirement Readiness Rating, a large percentage of people, including high earners, are likely to run out of money 10 to 20 years into retirement, which could create a serious crisis for “super seniors.”(7)
• The bottom line: Many working men and women are delaying retirement due to the economy. According to the EBRI’s 2010 Retirement Confidence Survey, the age at which workers expect to retire is gradually rising. In 1991, half of workers planned to retire before age 65 (50 percent), compared with 28 percent in 2010.(8)

Call to action

The political and economic landscape is in a state of flux, so it becomes almost impossible to project and plan far out into the future. However, it would be a disastrous idea to sit back and do nothing. Some tips to consider:

1. Treat Social Security as a bonus – Consider it found money, not as your primary source of income in retirement. Instead, build private resources with IRAs and annuities.
2. Determine how much money you will need in retirement – This is too important to guess. Talk to your financial advisor to help pinpoint your individual needs in real dollars and cents.
3. Find out how much money you already have – Add up your IRAs, employer benefits and other assets.
4. Calculate how much money you need to keep putting aside – To effectively save for retirement, most people need to save money every month.  This is the tough part, where necessity meets reality.  These days, retirement savings don’t always come from discretionary cash, but from tough choices.  Do you put off that new car for another year?  Do you skip next summer’s vacation?  Do you cut back from two dinners out each month to one?  The answer may be yes.
5. Learn how to put your money to work effectively – Determine your risk profile and the right balance between safety and opportunity.  Decide how much, if any, of your money should go into fixed accounts that offer guarantees but pay low interest rates. Should some or all go into more competitive choices, such as mutual funds or even stocks?  Your advisor can help you determine which mix is best for you and why.  It’s important to prepare for retirement sooner than later.  The sooner you start to save, the longer you can take advantage of compounding interest over time.  You do not have to go it alone.  If you have questions, give me a call to set up an appointment.  There is no cost or obligation.

(1) “Alarm Sounded on Social Security,” The Washington Post, May 13, 2009.

(2) “Public Confidence in Social Security on the Wane, Poll Says,” USA Today, July 21, 2010.

(3) “Ratio of Social Security Covered Workers to Beneficiaries Calendar Years 1940 to 2000,” SSA, undated.

(4) “Social Security and Retirement Income Adequacy,” National Committee to Preserve Social Security and Medicare, May 2007.

(5) “Social Security Program Fact Sheet,” SSA, June 30, 2010.

(6) “Income from Pensions & Annuities” EBRI, June 9, 2010.

(7) “The Scary State of Retirement Savings,” The Washington Post, July 15, 2010

(8) “How Many Workers Are Delaying Retirement? Why?” EBRI, April 28, 2010.

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Rich Mino, a financial advisor with Del Mar Financial Partners, Inc., works closely with families and small businesses in the Carmel Valley area.  He is passionate about making a difference in his community through financial literacy programs, and focuses on building strong relationships with all of his clients so that he can be a resource to them where needed most.  An active member of the Del Mar Kiwanis, Rich supports his Carmel Valley community through local service projects, and by sponsoring the Builders Club and Key Club leadership programs at Carmel Valley Middle and Torrey Pines High Schools.  In 2012, he is working to implement a financial literacy educational program to help prepare and educate kids with the challenges that they will face as they begin and graduate from college.  He is a registered representative of Securian Financial Services, Inc., Member FINRA/SIPC. Securities dealer and registered investment advisor.  Del Mar Financial Partners, Inc. is independently owned and operated. 12526 High Bluff Drive, Suite 280, San Diego, CA 92130. 438300 DOFU 01/2012

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties.  You are encouraged to seek tax or legal advice from an independent professional advisor.  The content is derived from sources believed to be accurate.  Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.  This material was written and prepared by Emerald. © 2012 Emerald Connect, Inc.

Securities and investment advisory services are offered through Securian Financial Services, membe FINRA/SIPC. Copyright 2010 © Custom Communications Insurance Publishing.

Material in this article may not be reprinted without permission.

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