Social Security Is America’s Pension

Abhorrent income inequality along with issues related to social safety nets like Social Security are political hot potatoes. They should be considered human issues.

I’m certain that most readers regardless of political affiliation have witnessed or experienced firsthand, wage stagnation; people close to retirement who complete comprehensive financial planning realize the positive impact Social Security has on retirement success rates.

Without Social Security included, even those who are excellent savers (I personally witness close to half), may experience financial vulnerability in retirement. Include Social Security or an inflation-adjusted income annuity that lasts a lifetime, and a retiree may depend less on variable assets like stocks to create a dependable, predictable income especially during market cycles characterized by poor sequence of returns risk. In other words, when investment assets do poorly over a series of years (believe it or not this does occur), lifetime income sources can pick up the slack and increase portfolio longevity – there’s less pressure to withdraw from variable assets that may require time to prosper or recover.

The fortunate few who have pensions AND Social Security are able to retire sooner and comfortably compared to their non-pension brethren, regardless of savings habits. According to Willis Towers Watson, only 16% of Fortune 500 companies offer defined benefits plans (pensions) to new hires (2017), compared to 59% in 1998.

According to surveys conducted by the Social Security Administration, roughly half the aged population live in households that receive at least 50% of total family income from Social Security. About a quarter of senior households receive at least 90% of household income from Social Security

The 2018 OASDI Trust fund balance (thanks to www.savvysocialsecurity.com), was $2.95 trillion. Social Security expenses will exceed income beginning in 2020 until 2034. At that time, payroll taxes alone are slated to pay roughly 79% of current benefits.

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The RIA Advisor team helps people make smart Social Security and Medicare decisions. Please reach out to us if you need assistance.

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