Preparing for Social Security cuts
There is heightened concern about the future of Social Security. Several industry experts have written that when the “trust fund” runs out in approximately 9 years, they expect a 23% cut in benefits unless something is done to stop it from happening.
Clients can set aside some money today to compensate for this income cut by using a DIA or QLAC. A 61-year-old couple waiting until age 70 to maximize their income could see a $17,400 loss. If they plan on replacing this income, they can pay a single premium of $130,000 today and in 9 years start receiving $17,400 guaranteed income for the rest of their lives. The link below provides an overview and access to the Social Security Trustees 270+ page 2023 report.
What’s Really Going to Happen When Social Security Runs Out of Money
Read our Integrated Insights™ – DIA’s & QLAC’s to learn more.
Social Security is facing many challenges.
I have been a long-time volunteer and board member for Park Lawn. Park Lawn delivers dignity daily to those with developmental disabilities. I continue to see firsthand how strained the system is to support all of those in it and those trying to be in it. This does not bode well for the amount each person gets. Anyone relying solely on their SSI benefit is likely to face additional financial strain. The developmentally disabled currently get a little under $1,000 per month. With continued inflation, additional system strain, limited increases and potential future cuts the financial pain will get worse.
John Oliver recently addressed the SSI/SSDI programs offered by Social Security. It is a concerning reality, but he adds a few laughs along the way. Enjoy!
Monte Carlo Concerns?
Many financial planning software programs run simulations to provide projections for clients as they decumulate during retirement. The problem is your actual sequence will determine your experience. If someone retired in 2007 and experienced a big nosedive in their portfolio value, it could be a plan that never gets back on track.
A growing ROI concern customers have is the Reliability Of Income. If clients have enough income to pay their basic living expenses and provide money for some fun along the way, they are less likely to be as concerned about the ups and downs of their portfolio along the way. Telling them they have a 90% chance their money makes it to age 90 may not be comforting enough. Only an annuity can provide a guaranteed lifetime income.
This is one reason why MYGA annuities are so hot for pre retirees. With 5-year rates around 5%, a client can lock in a good return and decide later how they will take income. This protects their money from a sudden downturn in the market with little time to recover before they retire. Avoiding a bad sequence of returns right before and early into retirement will increase their chance for success.