It probably will change but for whom? I don’t think benefits will change for people over 55 for 2 reasons:
They paid in longer and have a set of expectations of how much benefits they’ll receive.
Historically, those over 55 usually vote at a higher percentage than younger people.
Yes, they can affect benefits by making social security fully taxable (rather than 50% or 85%) for higher income individuals. This could happen. However the idea of increasing taxation on social security will not be politically popular.
The more likely scenario is they’ll increase the FICA/social security wage base limit and/or delay/increase the normal retirement age for younger workers.
I’m not a buyer that they’ll cut benefits for those over 55 (at least not directly) but that’s just my personal opinion.
I think they should just eliminate the limit. Some here want to tax those with more wealth more, what better way to help make SS solvent than to just remove that limit while keeping benefits the same?
Im not sure they would eliminate it entirely right away because it would be such a substantial change. But increasing it to $250k, $500k, $1 million could be plausible.
It really depends on how much revenue they can generate and the public reaction.
Social security is the topic that most politicians try to avoid but the wage base limit wont be as controversial.
Actually, it is quite a bit of science. Actuaries get paid big bucks to get it right. And for an individual, we can use different mortality tables ti forecast future cash flows based on our current health today. Scientific probabilities is more than a charade.
We had our FA do an anlysis and one of the factors that affected the age on which I took SS was the rate of return on my investments that I would be forgoing for the extra years I didn’t take SS. That is, if I deferred SS for a year, I’d be spending that money myself and it would not keep growing at the assumed rated of return.
The right age had to do with my wife’s status. I think she would be better off upon my death with half of my SS rather than taking hers (something like that). Sensible but tedious and idiosyncratic calculations.
Actually, the numbers are pretty simple. Mike Piper’s free site is easy to use. Just click on teh box top middle to add details for your personal situation
That is not only ‘one’ of the factors, it is the key factor for a FA to show an analysis that benefits the FA (by keeping assets under management). The discount rate that the FA will use will benefit the FA. Always.
Finance 101 would suggest that the FA should use a different discount rate if, for no other reason is that SS is a guaranteed return, whereas assets under management have both interest rate risk and sequence of returns risk.
When we took a financial planning class, the instructor said he planned to defer SS to age 70 if possible. His reasoning, which I’ve since learned is common, related to spouse benefit. His wife was younger, a stay-at-home mom with little income. He expected to outlive her and wanted to maximize her widow benefit - after death of one spouse, the other gets the greater of the two benefits.
Yes and the related advice is for the younger, lower earning spouse to take their benefit as early as possible to maximize the time they get payment since they will likely step up to the higher spousal benefit.
In our case, SS benefits approx same. Our FA gave similar advice…. defer SS for one spouse (my husband, older) til age 70 if possible. Then if something happens to one of us, the other will be assured of having a higher benefit.
An often asked question is - what should I look for in a financial advisor?
My personal opinion is find one that:
You’re comfortable working with and can have honest discussions. A relationship based on mutual respect rather than someone trying to pressure you into a solution that you dont really want.
Helps you understand your financial planning options - ie which age to take social security, the pros and cons, etc. Better advisors are typically more intellectually curious and want to learn strategies to serve their clients.
Gives advice on a wide range of topics in addition to just investment or retirement planning - tax strategies, social security, Medicare, estate planning, etc…
Also, many people think RIAs are always better (because they are fiduciaries) than advisors with broker dealers. I don’t believe that’s true. Just because they are a “fiduciary” does not make them more knowledgeable or better at helping their clients reach their goals. The firm they’re with (or how they’re paid) usually has no bearing with the quality of the advice.
@CFP, we’ve talked about this before. I agree with points 1-3 but I disagree that with your statement that “The firm they’re with (or how they’re paid) usually has no bearing with the quality of the advice.” If people get bonuses for getting their clients to enter certain kinds of investments, they will often unconsciously exhibit a bias even if they are not aware of it.
I work with two firms. One are RIAs and fiduciaries. The second is a wealth manager in a brokerage firm. Initially, they were not fiduciaries. The folks at the brokerage firm (who are superb at service) would listen to me but would come up unfailingly with investments that had very high fees attached to them (some of which went back to those who sold them). The RIAs were always looking at low cost, low fee approaches and would look at higher cost vehicles only if they were truly superior net of cost.
The wealth manager left and took his group to First Republic, I think. The brokerage firm introduced me to a new wealth management group, who are fiduciaries. There investment ideas are, for the most part, more similar to the RIAs (they have some philosophical differences but do not seem geared to promoting high fee options).
I’m not saying that all people are the same, but I think that on average incentives tend to work (which is why firms use them).
Im not trying to be snarky, but you need a big sample size. When I said quality of advice, I meant financial planning advice and not just investment advice.
Not all advisors at RIAs are expert financial planners - even though most probably think they are. Just use the past few posts as an example. Ask the RIA advisor to explain AMT in 10 minutes. Do they have an estate and tax background?
I think you mentioned your son has a very successful business - ask the advisor to explain QSBS section 1202 and if your son’s business qualify.
If you only want investment help, almost anyone can do that - you can do it yourself (and many people do).
There are probably thousands of amazing financial planners affiliated with broker dealers who understand even the most complex financial planning topics. Not all people need that level of advice but if I was hiring someone, I’d want to know their knowledge level. I’ve always suggested to people - focus on the advisor and the advice, not the firm. There are many excellent RIA advisors but just because they are fiduciaries does not mean by default, they are better for every client.
Think about it this way. If I was a client of an advisor at a tippy top broker dealer, I’m pretty comfortable that if I get screwed, they have deep, deep pockets. Im not recommending people choose BD advisors over RIAs - Im saying that not all fiduciaries are better planners. That’s just my opinion
Over our 20-year relationship with our FA, we’ve followed her from A.G. Edwards to Wachovia to Wells Fargo to Baird as she’s moved from agency to agency based on her comfort level with each institution. We totally understand her loyalties and investment principles and strategies. She hits on all three of @CFP’s criteria for a trustworthy advisor, but the proof of this honest, long-term relationship is that her advice and guidance got us exactly where we wanted to be earlier than we had planned. We started with her as a professional when we first met to discuss 529 plans when our son was in first grade, but count her as a friend now. She is a bit younger than we are, but when she starts thinking about her own retirement, she will give us an ample heads-up and discuss where we go from there. At that point, we will probably just move the portfolio to Fidelity and let it ride. We feel we’ve gotten stellar advice for the small percentage we’ve paid her, but probably will not continue to pay those fees once she retires. It’s been a mutually fruitful and rewarding relationship. She’s most definitely one of the good ones. We haven’t cared much about her changing office signage.
@cfp, I agree that the job is not just investments and the skills one should seek are much broader. Having a sensible investment plan is part of it, but estate planning, risk management, retirement planning, and quality of service are all part of what I would look for.
I suspect that you are also correct that, although the percentage of malfeasance is probably low, the probability of recovering from BAML or UBS is higher than from a small RIA.
I still think that incentives matter (that is, in effect, a part of our compensation plans for companies and the basis for economics) albeit not imperfectly, so I think one needs to take that into account. I’m much happier with my FA at the BD because they are now fiduciaries. Just eliminates one thing I have to think about.
We have a very good advisor whom we trust. We do know the two younger gentlemen he employs and mentors. Once our advisor retires (he’s probably 60), we’ll have to figure out if we want to stay with one of the other advisors or go it alone with Fidelity or Vanguard. Hopefully, it will be awhile before we have to cross that bridge. I’ve posted here before that we lost about half of our 401k portfolio in the late 2000’s. We just kept saving as much as possible, and we finally found someone we felt comfortable with to help us with our investments. Through all the ups & downs of the last dozen or so years, we’ve fared well & don’t begrudge our advisor his fee.
Yes, for a lot of couples, that is the best strategy for maximizing Social Security benefits. The spouse with the lower benefit takes it at 62 or close to it, reducing the odds that you will die before getting full advantage of what you paid in and reducing the draw on the nest egg. But the spouse with the higher benefit waits until age 70, taking advantage of the 8% guaranteed return and maximizing the benefit to the surviving spouse.
The math might be different if there is a big age difference in spouses or less difference in benefit between spouses. I haven’t plugged those kinds of variables into the online calculator.
