May 1, 2019 - Published by IAG Wealth Partners

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Last week the trustees of the Social Security trust funds issued their 270-page annual report on the financial security of the Social Security program. As the trustees have warned for many years, the current structure of the Social Security program is not sustainable beyond the mid-2030s.

This year’s report included great news for the Disability Insurance (DI) trust fund for the fourth consecutive year. Due to rapidly declining disability applications since 2010, Social Security’s DI program has fewer people receiving benefits today than in 2014. The trustees now project that the DI trust fund will remain solvent through 2052.

The trustees are not as optimistic about the Old Age and Survivors Insurance (OASI) trust fund. The OASI trust fund has two sources of income – a payroll tax of 12.4% which is paid by employees and employers and interest income on assets in the OASI trust fund which is “paid” by depositing additional government bonds into the trust fund.

Between 1983 (when the Greenspan Commission saved the program from imminent financial chaos) and 2010 payroll tax receipts exceeded the amount of Social Security benefits paid. For the last 8 years Social Security has needed to redeem its interest income bonds to make ends meet.

Trustees now project that starting in 2020 Social Security will need to start drawing down its $2,797,900,000,000 trust fund. Theoretically, the OASI trust fund has enough assets to pay benefits until 2035 at which time payroll taxes may be able to pay about 77% of the current benefits.

While Congress could make smaller changes to Social Security now to increase its long-term stability, it is likely they will repeat their mistakes of the past and wait until the very last minute before taking corrective action. This approach punishes those who like to plan ahead.

So how should you approach your long-term financial plan knowing that such an important source of retirement income will likely be changing in the future?

You should work with one of our planners to develop your personal Social Security strategy. In our experience everyone’s Social Security claiming strategy is different. We will need to take into consideration your earnings history, earned income, life expectancy, the age difference between married couples, and your other sources of retirement income among other variables.

Evaluating strategies for optimizing your Social Security benefits is one of the most important steps you can take for your retirement. It pays to plan ahead, even if Congress does not.

Quote of the week: John F. Kennedy: “Let us not seek the Republican answer or the Democratic answer, but the right answer. Let us not seek to fix the blame for the past. Let us accept our own responsibility for the future.”

Source: The 2019 Annual Report of the Board of Trustees of the Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds.

Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through IAG Wealth Partners, LLC, (IAG) a registered investment advisor and separate entity from LPL Financial.

Any opinions are those of IAG and not necessarily those of LPL Financial. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein.

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