How to Help Clients Through the New Social Security Deficit
Financial advisors may have a major role to play helping American retirees with the imminent shortage in Social Security funding. While changes to the program are likely and the government may very well take action to ensure retirement security, it’s also time to focus on funding retirement in other ways, according to an article authored by Prudential.
The program will run at a deficit this year for the first time since 1982, according to an announcement by the program’s trustees made earlier this month. And while it’s not quite time to panic, it is high time to address the potential gap in lifetime income for younger generations, says Rob Fishbein, vice president and corporate counsel at Prudential Financial.
Social Security was designed to supplement retirement income but an upcoming report from PGIM Investments says 61% of today’s retirees couldn’t have afforded to retire without the program in place. And the program currently covers 62 million Americans, according to the website. Younger retirement savers, meanwhile, are pessimistic about where their retirement income will come from: 58% of Generation X members believe they’ll have to continue working full- or part-time to meet their retirement needs.
Social Security’s trust funds are expected to run out of money by 2034, according to the website. Medicare’s primary trust fund is also expected to run dry in 2026, meanwhile, which is three years earlier than previously anticipated.
American workers want the government to step in: 80% of respondents to a recent Prudential survey say they’d like to see 2018 congressional candidates propose solutions to guard retirement security. Some legislative proposals, such as the Retirement Enhancement and Savings Act that allows for multiple employer plans to let smaller business work together to offer plans, already have bipartisan support, Fishbein said.
In the meantime, however, advisors should probably talk with their clients about what they can do to find alternate sources of retirement funding.
“Social Security’s downslide isn’t new,” Jill Perlin, vice president of advanced markets and sales training at Prudential, says. “What is new is that it’s become much more imminent.”