We would love to hear from you. Click on the ‘Contact Us’ link to the right and choose your favorite way to reach-out!

wscdsdc

media/speaking contact

Jamie Johnson

business contact

Victoria Peterson

Contact Us

855.ask.wink

Close [x]
pattern

Industry News

Categories

  • Industry Articles (16,283)
  • Industry Conferences (3)
  • Industry Job Openings (9)
  • Negative Media (138)
  • Positive Media (73)
  • Sheryl's Articles (605)
  • Sheryl's Blogs (171)
  • Wink's Articles (235)
  • Wink's Blogs (216)
  • Wink's Press Releases (94)
  • Blog Archives

  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • August 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • November 2008
  • May 2008
  • February 2008
  • August 2006
  • Will Social Security Really Be There for Your Clients’ Retirement Income?

    October 16, 2018 by Marcia Mantell

    Social Security is a critical product in every client’s comprehensive retirement income plan. In fact, it should be the first consideration in every plan, even for wealthy clients. Being on the receiving end of $3,000 per month per person is a good starting point – and it could be close to $6,000 per month for couples. The simple fact is, the more clients can get from Social Security, the less they draw off their own retirement portfolio. So, how can you guide clients when there is so much conflicting information out there about the viability of Social Security? Clients are confused and concerned. They are looking to you to provide all the answers.

    Be the voice of reason by helping clients navigate through Social Security facts versus fiction.

    Headline Hype and Hoopla

    It never fails to amaze how inaccurate or incomplete a headline can make any situation sound. The words can be too sensational, too racy, or just plain scary. This year has been no exception with Social Security headlines striking fear into the general public. One claimed the “Social Security Trust Fund Goes Bust” and another, “Social Security to tap Trust Fund first time in 36 years”. Such scare tactics can make anyone uncomfortable. The problem, all too often, is that clients don’t read much beyond the headlines – they simply don’t want to know, or think they already know.

    An important part of the financial advisor’s profession is that advisors not only read the articles to find the flaws in the headlines, but go to source documents to get real information. For Social Security, the top source is the Social Security Administration (SSA). On the SSA’s website you’ll find the most current information, and see that the report of Social Security’s death is quite premature.

    Learn to Love the OASI Trust Fund Annual Report

    While hardly a steamy romance or thrilling suspense novel, the Old-Age and Survivors Insurance (OASI) Annual Report is 270 pages of scintillating text and tables. In all seriousness, it is written by some of the top actuaries in the country, and folks who truly understand the inner workings of the system. They know how long and about how much, your clients will be counting on income from Social Security.

    There are several sections every advisor should read in the 2018 OASI Annual Trustee’s Report:

    • The first 5 pages. The introduction is two paragraphs, and you get four pages of important highlights in this overview section
    • Page 27. This is the accounting view of the Financial Operations of the OASI Fund for the prior year. You’ll see the details behind gross receipts which are our payroll taxes; and gross distribution which are payments to retirees and survivors. It’s simple and straightforward
    • Section VI. Appendices – The History of OASI and DI Trust Fund Operations. It helps when talking to clients to have a good perspective about Social Security and how it operates. The tables, starting in 1937, show historic payroll contributions and beneficiary payments. Very enlightening
    • Section VI. Appendices – History of Actuarial Status Estimates. If you are looking for details behind how long the Trust Fund might last, this is the section. The table on page 166 shows the “Year of combined trust fund reserve depletion” from 1982 forward.

    Projections Aim for 75 Years

    As you peruse the Trust Fund Annual Report, you’ll see rationale behind the numbers. One number of particular importance is 75 years. The last Social Security amendments were enacted in 1982, during a major crisis. The legislative changes implemented by Congress at that time were designed to continue about 75 years, or until around 2057.
    However, even with changes in 1982, the Trust Fund never quite made it to 2057. Rather, the projections bounced around between 2029 and 2051. The current projection shows the Trust Fund depletion around 2034.

    Predicting the size and scope of a program as enormous as Social Security is only a best guess in any given year. Yet, literally, tens of millions of people depend on these estimates in their retirement income planning.

    So, remind clients that Social Security is not fueled solely by the Trust Fund reserves. Rather, payroll taxes contributed by current workers fund the lion’s share of benefit payments. As long as we have employees working for covered employers, funds will be deposited into the Social Security program.

    With Conflicting Points of View, How Can Advisors Reassure Clients?

    It’s not a surprise that we have conflicting expert opinions and tantalizing headlines. As financial professionals, it’s important to recognize different points of view, but also to access and understand the sources of real information that you can share with your clients. Three distinct groups have emerged with their interpretations and perspective about Social Security solvency:

    • Group 1
      Social Security will be there. These are champions of the program. They base their perspective on the Trustee’s Report and believe the US Government will maintain a strong social safety net for America’s seniors.
    • Group 2
      Social Security can’t last. Social Security reserves are an accounting journal entry—a promise backed by the US Government. Current retirees depend on current workers to get their benefits paid; not on the reserves. There are fewer workers paying into the system today and more beneficiaries than at any other point in Social Security’s 83-year history. The math looks shaky right now. Is it such an extreme problem that we should throw the baby out with the bathwater?
    • Group 3
      Social Security will last if significant changes are made. That makes a lot of sense. Under today’s policies, we know there will not be sufficient payroll taxes to meet the needs of retirees. To strengthen the program, changes are in the wings. What the changes are and how dramatic remain to be seen.

    There are several members of Congress advocating for improvements. In fact, the Office of the Chief Actuary recently released a well-organized summary of ideas presented for shoring up Social Security and returning the program to full solvency. The summary states, “Recent Reports call for informed discussion, creative thinking, and timely legislation to address expected future deficits.” Links and detailed information covering 10 categories makes it easy to see the various proposals being discussed at the legislative level.

    Taking a Moderate Stand with Clients Is a Wise Approach
    So, now what? Can you believe Social Security will be there for your clients’ retirements? For your own retirement?
    Let’s look at what would happen if the skeptics are right and Social Security disappears. It’s not a pretty picture. Using the Retirement Income Calculator at T Rowe Price’s individual investor website, it was easy to assess the impact of losing Social Security retirement benefits. Here are the topline assumptions and results for two cases considered:

    Case 1: Single individual
    Sally was born on 4/1958, plans to retire at 66, and lives to age 95. Her salary is $145,000/year. She has saved $595,000 to date, and continues to save 13% into the company retirement plan in a 60% stock/30% bond/10% cash allocation. She’s planning to spend $5,000 per month in retirement: Social Security of $2,825 and personal savings of $2,175.

    This scenario shows she has a 92% chance of her savings lasting until 95. Not too bad.
    Cut Social Security out entirely and her chance of success drops to 14%. She could reduce her spending to $2,677/month, a 46% reduction. That gives her an 80% chance of not outliving her money.
    A more moderate approach is to cut her Social Security estimate by 25%, to $2,119/month. The likelihood of success drops to 73% if she does not make any corresponding cuts to her spending. But, if she can reduce her spending to $4,800 per month, the chance of having money at age 95 increases to 80%.

    Case 2: Married Couple
    Now, let’s assume Sally (born 4/1958) is married to Sam (born 8/1957). Sally’s salary is $145,000 and Sam’s is $85,000. Together they have saved $1.87 million for retirement. Each plans to retire at 66 and live to 95. They want to keep their lifestyle about the same, so are planning a monthly budget of $12,000. Their retirement income will be composed of $5,144 from Social Security and $6,856 from personal savings.

    At first cut, they have an 85% chance of their money lasting until 95. Assuming they may cut back somewhat as they age, this case looks promising.
    Cut Social Security out entirely and their chance of success drops to 29%. If they were willing to reduce spending to about $7,500 per month, a 38% reduction, the chance of their money surviving until age 95 increases to 80%.
    A more moderate approach is to cut Social Security estimates by 25%, to $3,858/month. The likelihood of success drops to 73% if they do not make any corresponding cuts to spending and overall expenses. Some difficult trade-offs may be necessary.

    Bottom Line
    These are draconian measures clients may face if nothing is done to shore up Social Security. So, to let clients believe Social Security is on the brink of total disaster with no hope of improvement is not reasonable or responsible. No one but the most wealthy could survive such severe cuts to Social Security income. The SSA knows it. Congress knows it. And financial professionals know it.

    There is plenty of time to make changes to strengthen Social Security. But it is unsettling and uncertain when clients are at the point of making decisions about creating income for the next 30 years—without a paycheck. As a result, the sooner the lawmakers make Social Security improvements a priority, the sounder millions of near-retirees will sleep.

    The cure here is for financial professionals to be a staunch voice of reason for every client. Counterbalance the hype, hoopla, and hysteria that clients face on a daily basis with measured, factual information. Read the Trustee’s reports. Calculate the implications of moderate cuts to Social Security. Show clients their results in a personal, helpful way. More important, help each client make the best possible decisions despite all the noise out there.

    …and One Last Thing
    The Center on Budget and Policy Priorities has an excellent 3-page piece called Understanding the Social Security Trust Funds. It might serve as a good handout or link for clients who are concerned about the viability of Social Security. Take a read. ◊

     

     

     

    by Marcia Mantell, RMA, NSSA

    Ms. Mantell is the founder and president of Mantell Retirement Consulting, Inc., a retirement business development, marketing & communications, and training company supporting the financial services industry, advisors and their clients. She is author of “What’s the Deal with®… Retirement Planning for Women” and blogs at BoomerRetirementBriefs.com.

     

    Originally Posted at Advisor Magazine on October 15, 2018 by Marcia Mantell.

    Categories: Industry Articles
    currency