With the presidential debates heating up, candidates are purposely avoiding the issue of social security. Experts say that shortfalls can be expected in the program by the year 2033, with retired Americans only receiving 77% of the full benefits they were promised.
FLAGSTAFF, AZ - 3/3/2016 -- One thing most presidential candidates have in common is that they enjoy debating things, but few want to venture out into the landscape of Social Security reform. That’s because many have tried and failed to make any lasting or beneficial changes to the program. Hillary Clinton has been talking about Capital Gains reform. Many experts have called her plan “stupid” because it basically doubles the capital-gains tax rate for the sale of assets like real estate, stocks and bonds. The naysayers are pointing out that Clinton’s plan would discourage investments at a time when the government should be encouraging them.
Though there’s very little chance her plan will even be further discussed, it highlights the fact that politicians are struggling to make some sort of announcement, impact or commentary that will get the attention of the voting public. As with all presidential elections, Social Security reform continues to be an important, but complex subject for discussion. What so many have overlooked is that Social Security has been successfully providing retirement benefits for 80 years to elderly Americans. While thousands of programs, fads and schemes have come and gone, Social Security is still in operation. That’s not to say the program hasn’t experienced it challenges.
New reports are asserting that by 2033, the Social Security program will only be able to pay out 77% of benefits to recipients. This means that if an individual works hard for 40 years and is entitled to an $1,800 a month pay-out, they’ll only be getting $1,386 per month in the year 2033. Millennials are the group who will be primarily affected by these shortfalls. If an individual was born in 1985 (millennials are considered those who were born between 1980-2000), then they would be retiring in the year 2050. Without some dramatic changes to the Social Security program, there’s a very good chance that this individual would not even be able to collect 77% of their benefits.
All this talk of Social Security shortfalls has many Americans worried, but financial planners say that the solution is simple: Americans must stop relying on Social Security and other government benefit programs and develop their own retirement income strategies. With the guidance of a good financial professional , there’s no reason that Americans can’t create a retirement income that they won’t outlive.
According to Travis Babb at Babb Financial Group LLC in Flagstaff, Arizona, individuals must now take other mitigating factors into consideration. “The changing economic landscape in America makes it imperative that individuals factor in the unexpected,” says Babb. “No one has a crystal ball. Every retirement portfolio should be globally diversified,” he claims, citing the recent financial meltdowns of Greece and China. “Baby boomers who are retiring now need more information.
Making just one mistake can have implications on their portfolio. When planning for retirement, people have to take into consideration illness, the death of a spouse, recessions, inflation, cost of living adjustments, and all types of unexpected events.”
Today’s retirees are living much longer as well. In fact, on average, someone living today can expect to collect at least 12 additional years of Social Security as opposed to those in 1940. With modern medicine, innovative treatment options, and all-new drugs, it’s very possible that the American lifespan will gradually climb. In the year 2000, there were approximately 72,000 centenarians in the US. By the year 2050, it is estimated that there will be about 834,000.
Barack Obama has said in the past that we should capture new revenue, but has no definitive plan on how to do that except for asking the wealthy to pay a bit more payroll tax. He has also stated that he does not favor the privatization of Social Security. Donald Trump, on the other hand, says that a politician cannot change Social Security and Medicare and still win an election … and he is all about winning. One of the statements that Trump has made that has endeared older Americans is that Social Security is not an entitlement; it’s honoring a deal. He also believes Americans must take their own role in providing for retirement more seriously.
According to a recent article in AARP, Americans who are over 50 are now very influential in deciding elections. Those from ages 55-64 control about 25% of the nation’s wealth, while Americans 65 and over now control about 30%. That’s a combined 55% of the nation’s wealth controlled by people who are 55 years of age and older. Politicians know these numbers quite well and can be expected to pander to this group of older wealthy Americans from now through election time.
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