Retirement Planning

Happy Summer Everyone! I’m starting a four-part series discussing a topic that garners both questions and some large concern – Social Security.  At face value it seems like a simple issue – claim my benefits at full retirement age and enjoy a fresh deposit on the 3rd of every month. In reality there are several issues when it comes to SSI – when to claim, spousal benefits, the solvency of the SSI Trust Fund, political meanderings, cost of living increases – you get the idea.  My plan is to break this into digestible sections that include: When should I take Social Security? Will SSI be there when I need it? Could my benefits be reduced? Challenging the conventional wisdom of always waiting until age 70 to claim benefits (the 59 ½ Rebellion at work) The future of SSI – what might change For many, their primary concern centers around timing [...]

Last week we discussed the “right” time to claim Social Security and the personal nature of that decision.  This week’s topic cuts to the core of what many of our clients and friends are concerned about – the long-term solvency of Social Security (SSI).  It is a valid concern and many changes to the system are likely to be made in the future. According to the 2026 EBRI Retirement Confidence Survey, nearly 8 out of 10 workers and 7 out of 10 retirees are concerned the government will make significant changes to America's retirement system. At the same time, only about half of workers are confident Social Security will continue paying benefits similar to today's levels. Our current system relies on a “pay-through” structure.  Current workers (citizens paying Social Security payroll taxes) fund current Social Security recipients. If we have enough workers today, and in the future, paying enough taxes then current benefits could continue unabated.  Any deficiencies [...]

When contemplating one’s Social Security claiming decision, I’ve met with many clients who have strong views about taking their benefits early.  However, many are also intrigued by what the possibilities may be if they defer their benefit until they are age 70.  While the math will generally favor the latter strategy, life has a way of altering our view of “the math!” Take a look at Bill and Betty.  Bill is 62 and has worked as an executive his entire career. Betty worked off and on throughout the years but mostly in part-time endeavors.  Full Retirement Age (according to SSI) is age 67.  They can begin taking benefits now since Bill is 62.  They can also wait until both are age 70.  Their benefits at their FRA (age 67) are $3,000/month for Bill and $1,800/month for Betty.  SSI maximization software will tell them the following: If both take their benefit [...]

One of the tactics that is becoming both more attractive and common is what I’ll call the “Pre-Retirement Gap Year.”  Personally, when I consider gap years, I envision my kid telling me they want to go to Europe and “find themselves” either during or after college.  It’s at this point I remind them that I started my career exactly 7 days after college graduation and they should just take a look in the mirror if they feel lost. Harsh – but I frame it in a much more pleasant speech!   Taking a gap year later in life can have mixed effects on a career, depending on factors like industry, role, skills, and the person's plans upon returning. If a gap year is on your bucket list let’s examine a few of the potential challenges and opportunities.   Potential Income and Career Growth Income Dip: Professionals who take a mid- [...]

Many of our clients and friends have been expressing their desire to retire “early” or before age 65.  As I mentioned in our last blog, working until 65 is what we always just “did.” Well, pressures from COVID and general workforce stress have caused many to begin rethinking their options.  We’ve been fortunate to help bring this vision forward for many families and have learned much during the journey. As you think about the possibility of retiring early—before age 65—there are many factors to consider, both in terms of planning and the exciting opportunities it can bring. Here's a beginning framework to help you consider this big transition: Key Issues to Address: Healthcare Coverage:  Without access to Medicare until age 65, securing affordable health insurance is a critical step. We can explore COBRA, private insurance, or marketplace options to ensure continuous coverage. Income Strategy:  You will need a clear plan [...]

Many of our readers, clients and friends are either retired, contemplating retirement or plotting a future that will eventually include retirement.  The rare bird in our mix will decide to never retire or indefinitely remain engaged at work similar to Warren Buffett.  My choice of profession has allowed me the rare privilege of being able to help hundreds of families plot and execute their retirement planning. I’ve seen it done well and I’ve seen it turn into disaster.   While the second outcome is less prevalent, it does happen occasionally. For our next series I’m going to focus on rethinking retirement inside the following framework: ·      Retirement mentality – merging emotional and financial planning considerations ·       Retiring early –considerations, cautions and steps to make it happen ·       Retiring from work but not life ·       Making the most of your tax [...]

To date we have looked at the status of the Social Security system and some potential fixes to keep the system functioning. Today, I’d like to help answer – what, if anything, should we be doing to prepare for an unknown Social Security future? “According to a 2023 Gallup poll, 43% of current retirees expect to eventually experience a cut in Social Security benefits.” – Kitces.com. While this is possible, it remains unlikely given that the system would still be 83% funded if the trust fund itself was to be liquidated by 2035. As we discussed earlier, current benefits are paid by current workers. We are also seeing states get into the act by reducing retirement income taxes. In Iowa, for many taxpayers, taxes are not collected on any retirement income. One way we can model a potential cut in benefits is to eliminate the cost of living increases we [...]

“The economist John Maynard Keyes said that in the long run, we are all dead. If he were around today, he might say that, in the long run, we are all on Social Security and Medicare.” – Ben Bernanke, Former Federal Reserve Chairman Last week we discussed the solvency and current framework for the Social Security system.  While there are definitely cracks in the Trust Fund we also learned that payroll taxes are the primary funding source in today’s system.  The next question we need to answer then, is what options do we have if the payroll tax system becomes ineffective?  What options are there to extend and/or improve the social security system for current and future generations? Demographics (an aging population) play a large role in the current decline of the trust fund.  “While there were 3.3 covered workers per OASDI beneficiary in 1985, there were only 2.7 workers [...]

“While the state of Social Security’s trust fund reserves often receive significant media attention, in reality, the bulk of funding for paying out Social Security benefits comes from Federal Insurance Contributions Act (FICA) taxes, more commonly know as payroll taxes.” – Adam Van Densen, Kitces.com Standup comedians tend to take normal life circumstances like parking the car or airport bathrooms and turn them into something comical.  The results are mixed – Seinfeld built a whole show around essentially “nothing.”  To date, I’ve never heard one use Social Security as a topic du jour if they are looking for laughs.  “A guy walks into a bar with a poodle under one arm and a Social Security Check under the other.”  Definitely not funny.. The funny/irony/interesting thing about Social Security is the confusion about its overall status as a benefit, how it is funded and the benefits runway that awaits younger generations.  [...]