How Social Security Woes Change Retirement Planning

There is a fact that the majority of financial advisors agree on: Social Security will not be going away, but it definitely will have some changes. The program has been running in the red since the 80s, and in 15 years it will no longer be fully funded. The most likely kind of change to Social Security will be more cuts.

While advisors at one end of the spectrum are warning their clients that they should plan on getting nothing from a system they’ve paid into for decades, at the other end, clients with fewer resources are likely over-relying on what they will receive. Some of the advisors on the low end project that their clients will receive 5-10% of their retirement income from Social Security. This has many clients worried about their retirement; 59% of those recently surveyed by the AARP said it was only “somewhat likely” or “not at all likely” that the combination of their savings, investments and Social Security benefits would be sufficient to cover their financial needs through retirement.

Mark Friedenthal, the founder and CEO of Tolerisk, a Marlton, New Jersey-based firm that makes software for advisories, says that advisors should broach the subject of Social Security cautiously with their clients. Especially those that are well-prepared. He says that, “it may also be prudent to exclude Social Security for those [clients] with likely taxable income of $250,000 [present value] or more in retirement.” This outlook is for clients with considerable defined benefit pension incomes, $10 million-plus in taxable assets or $5 million-plus in traditional IRA/401(k) assets.

See Gregory Bresiger, How Social Security Woes Change Retirement Planning, Financial Advisor, April 25, 2019.

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.