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The Future of Social Security – Presented by Mark K. Lund, Financial Advisor in Utah

Financial Advisor UtahSocial Security has always stirred strong opinions. When it was first proposed during the Great Depression, there was vigorous debate about who would receive it, at what age, and how the program would be paid for going forward. In the decades since, the program has been adjusted many times by Congress. They’ve expanded its role, changed benefit levels and age requirements for various groups, and utilized many accounting maneuvers to keep the program solvent.1

Today it’s no different. In February, the Congressional Budget Office released a report warning that the Social Security trust fund is on track to run out of money by 2032. This is a year earlier than their previous estimate.2

In response, a bipartisan group of senators has been meeting to discuss possible solutions for shoring up funding for Social Security. They expect to release their recommendations by the end of the year.

Speaking for the group, Senator Mitt Romney said, “It’s a huge topic with enormous interest, and the fact that we have both Medicare and Social Security that are slated to become insolvent within a decade suggests that we need to make sure to save them.”

With a trillion dollars in benefits set to go out in 2023 alone, figuring out how to pay for anticipated increases is a math problem indicating answers few people like.

Social Security is funded through a payroll tax paid by workers younger than retirement age. The steady increase in Americans over 65 as a percentage of the population has meant that fewer and fewer workers are paying to support each retiree. In 1960 the ratio was just over five to one. By 2030 it will be about half that.3

Additionally, Americans who reach age 65 are expected to live longer than previous generations, which is good news. But it also means they will draw on Social Security for more years.

If the government simply continues to pay benefits under today’s rules, borrowing the money to make up the difference, it will lead to even more of the federal budget going toward interest payments. But if they just “print money”—spending without a source to pay for it—it will cause the kind of severe inflation that quickly erodes the dollar purchasing power of the benefits.

The solution that is being talked about (one that is sure to make all sides a little unhappy) is a combination of increasing taxes and raising the qualifying age. Any such changes would likely be phased in. For example, in 1983 Congress approved legislation that has gradually raised the age at which you can receive full benefits. For most baby boomers it’s 66. For those born in 1960 or later it’s 67.4

For decades, younger workers have been pessimistic about their chances of receiving Social Security when they retire.5 Yet Congress has found ways to keep it viable for now. Given the popularity of the program, it’s likely to continue into the future.

As someone saving for retirement, it’s good to be aware of your projected Social Security monthly benefit and the age at which you can begin receiving it. Depending on your situation, it might make sense to delay claiming your benefit. In others, there may be good reasons for taking it early. Talk with your trusted financial advisor to understand how expected Social Security benefits are factored into your long-term plan.

If you ever have any questions about your investments or retirement plans, please feel free to give me a call at 801-545-0696.

Regards,
Mark Lund
Stonecreek Wealth Advisors, Inc.
11576 S State Street, Bldg. 1002
Draper, UT 84020

Sources:
1. http://go.pardot.com/e/91522/-Social-Security-United-States/92y7zh/1855332323?h=8hkCaZVj4fUzBSSZtInYb_lK_e1zFx-QwnPsovEOUH4)
2. http://go.pardot.com/e/91522/social-security-age-72231-html/92y7zl/1855332323?h=8hkCaZVj4fUzBSSZtInYb_lK_e1zFx-QwnPsovEOUH4
3. http://go.pardot.com/e/91522/curity-recipient-worker-ratio-/92y7zp/1855332323?h=8hkCaZVj4fUzBSSZtInYb_lK_e1zFx-QwnPsovEOUH4
4. http://go.pardot.com/e/91522/-the-future-of-social-security/92y7zs/1855332323?h=8hkCaZVj4fUzBSSZtInYb_lK_e1zFx-QwnPsovEOUH4
5. http://go.pardot.com/e/91522/hy-social-security-is-popular-/92y7zw/1855332323?h=8hkCaZVj4fUzBSSZtInYb_lK_e1zFx-QwnPsovEOUH4

Disclosure:
This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This material was prepared by Efficient Advisors, LLC (“EA’) for Mark Lund, Mark is a Financial Advisor in Utah. He is known as a Wealth Advisor, The 401k Advisor, Investor Coach, Financial Planner, Investment Advisor and author of The Effective Investor. Mark offers investment advisory services through Stonecreek Wealth Advisors, Inc. a fiduciary, independent, fee-only, Registered Investment Advisor firm providing investment management and retirement planning for individuals and 401k consulting for small businesses. Mark’s newsletter is called The Effective Investor Newsletter. Cities served in Utah are: Salt Lake City, Salt Lake County, Utah County, Park City, Murray City, West Jordan City, Sandy City, Draper City, South Jordan City, Provo City, Orem City, Lehi City, Highland City, Alpine City, American Fork City. The views expressed herein are exclusively those of Efficient Advisors, LLC (‘EA’), and are not meant as investment advice and are subject to change. All charts and graphs are presented for informational and analytical purposes only. No chart or graph is intended to be used as a guide to investing. EA portfolios may contain specific securities that have been mentioned herein. EA makes no claim as to the suitability of these securities. Past performance is not a guarantee of future performance. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. All opinions expressed herein are subject to change without notice. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.

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