Social Security Uncertainty Ups Need for Expert Advice
Social Security may be dismissed by some wealthy clients and their advisors, but it provides certainty few other investments can —and it could turn out to be the only source of funding in retirement even for the wealthy, Financial Advisor magazine writes.
Ninety percent of Americans 65 and older receive Social Security, according to Social Security Administration data cited by the publication. And three in five American retirees currently depend on Social Security for up to 50% of their income, according to the publication. And it’s not just for the less affluent. Without any Social Security benefits even people with more than $1 million in liquid assets have a 70% chance of taking “a lifestyle hit” or even running out of retirement savings, Ben Gurwitz, wealth manager and chief investment officer at Financial Life Advisors, tells FA magazine.
Meanwhile, payouts in the Social Security program are expected to surpass revenues in 2022, according to the 2017 report from the Social Security Board of Trustees cited by the publication. And by 2034, it’s expected to run out of funds entirely unless Congress acts, FA magazine writes.
One solution to ensure continued funding of the program is to raise the income cap beyond which the 12.4% payroll tax doesn’t apply, which is currently $127,200, according to the publication. The other option would be to reduce Social Security payouts to higher-income beneficiaries, with a GOP proposal to phase them out at $60,000 for individuals and $125,000 for couples, FA magazine writes.
Either way, Americans across the wealth spectrum will likely be affected and many wealth management clients are already asking their advisors about what will happen to them if benefits are cut, advisors tell the publication.
Joe Breslin, a planner with Armstrong, Dixon, tells the publication he’s optimistic the Social Security shortfall will be addressed within the next 10 years. He says the firm tells clients to focus on what they can control. If benefits are reduced, clients may have to increase savings, delay their retirement or cut down on spending in retirement, FA magazine writes.
Meanwhile, Lazetta Rainey Braxton, founder and CEO of Financial Fountains, tells the firm’s clients they should consider Social Security a bonus and focus on maxing out all other investment options, including 401(k) plans, individual retirement accounts and even rental income, according to the publication.