Life After Work - Will I Be "OK"?

    Before considering potential solutions to shore up the Social Security system, it’s important to understand how we got to this point.   Up until 2010, more tax money went into the Social Security system than was paid out in benefits.   The extra money went into the Social Security Trust fund and was used to buy “special-issue” U.S. Treasury Securities.   These are U.S. government bonds that are issued solely for Social Securities reserves. This is the only investment Social Security is allowed to own.   In short, Social Security lent the money to the U.S. government which then used the proceeds to help pay for general expenditures.   This is why some people claim that the U.S. government spent all of the excess reserves.   On one hand, they did.   On the other hand, they replaced the money with IOUs that paid interest each year to Social Security.   Regardless of how you view this situation, the fact of the matter is that the bill ...

  We continue to get closer to the date at which the Social Security Trust Fund will be depleted.   Yet Congress continues to do nothing to solve this problem.   Under current law, once the trust fund is depleted in 2034, benefits must be cut across the board.   This cut is expected to be 24%.   I covered potential solutions as well as made my prediction of how Congress will most likely deal with this problem in an earlier blog ( How They Will Likely Fix Social Security by Scott Stolz, CFP, RICP (week 29) .   A column in this week’s Barron’s offered a new potential solution which I expect will get legs because it will initially impact few taxpayers.   In fact, the title of the article is “Social Security is Broken.   Benefit Cuts for the Rich Are the Fix.” ( Social Security Is Broken. Benefit Cuts for the Rich Are the Fix. - Barron's ).   Who doesn’t like the idea of a problem like this being solved by taxing those that have more money than t...

    There’s plenty of advice online on how to find a financial advisor that fits your needs.   And quite frankly, all of it is rather good.   You should most certainly understand what services any financial advisor does and does not provide, how he or she is compensated, and what credentials he or she has.   Understanding the advisor’s process and investment philosophy is also important.   The Financial Planning Association will most certainly tell you that you should select only Certified Financial Planners (CFP®).   Registered Investment Advisory Firms will tell you that you should only choose an advisor that always serves as a Fiduciary (someone that must put your interests first).   One such firm constantly runs commercials that claim “we do better when you do better” and “we never sell commissionable products.”   While I fully agree that any advisor should always put your interest first, just because an advisor does not receive a c...

  This week I’m going to take a break from writing about financial stuff.   If you read this blog on a regular basis, you’ll probably appreciate a break as well.   Sunday’s Flyover Florida polled its readers on whether or not they have plans to go to a concert this year.   Today’s edition reported the following results: Will you attend a concert this year? 1.       No: 44% 2.       Maybe: 30% 3.       Multiple: 17% 4.       One: 9% I have to say, those results surprised me.   Since Covid, tickets for almost any concert or sporting event have gone through the roof.   My economics background tells me that this is about too many people chasing too few tickets, thereby driving up the price.   But with only 1 out of 4 respondents saying they were planning to go to one or more concerts this year, that doesn’t seem like excessive demand.   Me, ...

  Transamerica’s Center for Retirement Studies asked 2,690 retirees to identify their greatest fears in retirement.   Of the eleven most commonly sited fears, six of them are directly related to having enough money in retirement. Despite this fear, the same study found that only 22% of the respondents indicated that they own an annuity – the only financial vehicle other than social security and a pension that can provide income for life.   In academic circles, this has been labeled the “annuity puzzle.”   Simply put, even though multiple studies have shown that about 70% of those surveyed find the concept of protected lifetime income attractive, relatively few people actually end up utilizing annuities to provide that income.   Why is that? In my view, there are 3 primary reasons: 1.       While people like the idea of creating a pension, few want to actually pay to create one. You spend your whole life building a retirement nest...