Beyond The Horizon
As we start off the New Year with record highs in the DJIA and the S&P 500, it bears witness to the historical fact that the markets do well in an election year. And for added flavor, there is much talk that the Fed will cut rates this year, something that the market has already factored in. There seems to be much discussion as to the range of the cuts but being that it is an election year and although the Fed is supposed to be non-partisan, they will do whatever they can to help this administration and its political party.
Having said that, there are some storm clouds on and over the horizon for Americans. For some time, many experts within the government and outside have said that the Social Security Trust Fund is in danger. Well, forget about the danger piece, the Trust Fund will be out of money in 2034. Ten years, it isn’t that far off. The problem is if nothing is done, there will be cuts anywhere from twenty-seven percent to thirty percent in benefits. Social Security benefits play a large role in your retirement, taking a thirty percent pay cut in one income stream of your retirement can be substantial.
I began watching this five years ago, expecting that in one of the many appropriations bills, someone would sneak in raising the full retirement age and or lifting the income threshold past $170,000 and continue taking out the taxes. Could that have helped? Maybe, but now many are studying the impact of a radical change and from one of the many trade associations newsletters we receive, there are two ideologically opposed academics that suggest eliminating tax preferences for 401(k)’s and individual retirement accounts as a solution to filling the trust fund up. If that doesn’t raise the hair on the back of your neck, I don’t what will. I am not sure how much of this will ever find its way to fixing the trust fund, but unless something is done, benefit cuts, tax increases are all on the table.
Fortunately, we can model Social Security cuts in our client’s retirement plans. Being able to look beyond the horizon, more than 10 years out, we can provide some piece of mind so you know what to expect and plan for. If you haven’t had a consequential discussion with your advisor about Social Security, maybe you should this year.
Mike
Mike Mickels is the President and Chief Compliance Officer of CochranMickels Retirement Specialists, LLC and an avid sporting clay competitor. CochranMickels Retirement Specialists provides personalized planning and investment services to individuals approaching and in retirement. CochranMickels Retirement Specialists, LLC is a registered investment adviser. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where CochranMickels Retirement Specialists, LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. As a registered investment advisory firm, we are restricted from posting, publishing or otherwise disclosing any form of testimonial which is related to our investment advisory services.
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