Murray K. from Portland, ME asks: Hi Mitch, I’m 51 years old and have a decent amount of retirement savings, but part of my retirement plan relies on income from Social Security. Is there a possibility I won’t see those payments when I plan to retire at 65? What is your take on the whole Social Security situation?
Mitch’s Response: Thanks for writing, Murray. I generally do not delve into policy/government issues when they are not related to the equity and fixed income markets, but I have a few thoughts I can share with you regarding your question on Social Security.
The first thought is that you still have 14 years until you retire. That is a good amount of time to save more and to grow your retirement nest egg. Sometimes it’s good to just imagine that Social Security is not going to be there, so that you get extra motivation to put away as much as you can and invest for growth. The questions you want to ask yourself are: how much do I need saved by age 65 in order to provide the retirement income I’ll need for my lifespan? How much do I need to save additionally between now and age 65, and what rate of growth do I need to get there?
If you aren’t sure how to run those types of retirement calculations, please do not hesitate to reach out to a Zacks Investment Management representative at 1-888-600-2783, and we would be happy to run those numbers for you. Doing so will help give you a better picture of where you currently stand, and we can give you ideas for how to make improvements to your plan.
On the issue of Social Security, I think the program will still be in place when you’re 65 years old, which will be in the year 2031. The question is, will the government have to cut benefits because of stress on the program’s funding? That is a difficult question to answer. Some reports show that the trust fund for Social Security’s retirement and disability benefits will stop being fully funded in 2034, which could mean that a significant cut to benefits is unavoidable. Medicare’s hospital insurance trust fund is also at risk, with some projections showing it will not be fully funded by 2029 (According to Bloomberg).
But, I think the bigger risk here is not whether Social Security payments will be there for you – it’s whether those payments will be significant enough to cover the cost of living. As we get older, a larger percentage of our income tends to go to health care costs. It’s just a fact of life. The problem is that health care costs are rising at a much faster clip than Social Security benefits are growing, and as I mentioned before, there could be cuts to benefits even just a couple of decades down the road. If health care costs continue to rise for retirees at a projected rate of 5.5% per year over the next decade, an increasing share of Social Security benefits will go towards paying for health care (according to HealthView Services). That means having less income available for lifestyle spending that should go along with retirement, such as for traveling or whatever your hobbies may be.
All that said, my advice would be to focus as much as possible on saving and growing your own retirement nest egg, so you have more choices and flexibility down the road. If you want help with your retirement plan, please reach out to us at 1-888-600-2783 and we would be happy to work with you. There is a better way, and we think at Zacks Investment Management we can help retirees and future retirees find it. We do this, by providing a customized analysis for every client, and then use our independent research and tools we developed to design a customized investment portfolio based on each individual’s needs and plans for retirement.
In the meantime, if you are looking for additional resources to help guide your retirement plans, I invite you to download our guide “4 Steps to Managing Your Retirement Assets.” This guide offers insight to help you make critical decisions about your retirement and outlines four simple steps that can give you an added advantage when you retire. Download your free copy today by clicking on the link below:
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