As part of our analysis on Obama’s re-election and its impact on the economy, we are offering three articles in this space.
Last month, we wrote on his tax policies and next month on healthcare/Medicare.
This month – Social Security:
The backdrop is that assuming current demographic trends, the Social Security trust fund may be depleted by 2033, if not well before then.This would mean that, absent changes to the system, retirees may only receive 75% of promised benefits beyond the year of depletion.
The social security trust funds can be shored up in a number of ways, including changing eligibility rules, reducing benefits or increasing revenue to the funds. This is also called “entitlement reform”.
So far, the President has not laid out specific actions to bolster Social Security but apparently, is willing to discuss ideas to stabilize the program, this accommodation most likely so that he may further his other agenda items.
He has been clear on the following:
1. Reduce benefits for future retirees – NOT IN FAVOR
2. Privatization of Social Security – NOT IN FAVOR.
3. Raise the cap on earnings subject to the Social Security tax from the current $110,000 (aka Social Security Wage Base) – OPEN TO THIS
There are 10, 000 Baby Boomers (those born 1945-1965) per day turning 65 for about the next 18 years. Therefore, this subject will be a central debate in ways to reduce the Federal Deficit for the foreseeable future.
There is a very real possibility that pre-retirees (those their mid-fifties) and certainly those younger than that will need to FULLY FUND retirement years with their own savings. This is not a disaster, it just takes some planning.
When doing your retirement planning, it is important to consider the effects that entitlement reform may have on your own financial plan.
Eaton Financial Group is a full service, fee-based financial advisory firm.
They focus on financial planning for the conservative investor.
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