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Bart Steindler

Bart Steindler

Bart Steindler's 37 years of business experience has focused on 3 areas. Providing value to clients, mentoring employees, and adding guidance as part of the management team. As a representative selling industrial paper and packaging products, or subsequently as an investment advisor, finding the right product solution for his clients has always been a key to his success. He has always strived to understand the client’s plan, and how his work affects it.


Perspective | As an owner and a manager, Bart has always put an emphasis on mentoring colleagues and guiding a profitable company to the mutual benefit of owners, employees, and clients. Bart has contributed his time to many organizations. Currently he is actively participating with The Kids Food Basket, Meijer Gardens, Temple Emanuel, and The Grand Rapids Community Foundation.


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Bart and his wife Kathy, live in Grand Rapids, Michigan, and enjoy biking and skiing for recreation.

As some of us get closer to retirement, programs like Social Security and Medicare become more important to us. We have paid into these programs with every paycheck we have earned. There has been an implied promise that these programs would add financial security to us in our retirement. These programs are not entitlements, since we have paid for them with involuntary deductions from our paychecks, earmarked for Social Security and Medicare.
 
Each year the Office of the Chief Actuary, publishes “A Summary Of The 2016 Annual Reports.” This is a summary of the Trustees Report of the Social Security and Medicare Boards of Trustees.
Here are some amazing facts from the summary.
 
“Social Security and Medicare together accounted for 41% of Federal program expenditures in fiscal year 2015. “
 
“The OASI (Old Age and Survivors Insurance ) and DI ( Disability Insurance ) trust funds are by law separate entities. However, to summarize overall Social Security finances, the Trustees have traditionally emphasized the financial status of the hypothetical combined trust funds for OASI and SI.”
“The Trustees project that the combined trust funds will be depleted in 2034, the same year projected in last year’s report.”
If changes are not made, reserves will be depleted by 2034, and estimates are that benefits will have to be cut by 25 per cent.
Medicare is in worse shape.
“The Trustees project that the Medicare Hospital Insurance Trust Fund will be depleted in 2028, two years earlier than projected in last year’s report.
The Conclusion of the report is that Lawmakers should take steps that would reduce or eliminate the long term financing shortfalls in Social Security and Medicare, and that it should take those steps sooner rather than later.
There are not any easy decisions to make. All decisions will be negative to some or all of our population.
There are two narratives that are harmful to the discussion. The first narrative is that we need to add benefits to these programs. The premise of groups that support increasing social benefits is that our country has too much income inequality. Too many people have reached retirement age and have not sufficiently saved for retirement. Another point is that the COLA increases are not sufficient for lower net worth retires that are facing higher expenses. While it would be nice to be able to increase the social security benefits, we cannot raise the benefits for a program in its current state. Proponents of raising benefits want to raise the amount of income subject to social security tax. Unfortunately, we will have to do that anyway in order to maintain current benefits.
 
The second harmful narrative is what I call the blame game. In other words, making Social Security and Medicare a political issue to demonize political opponents. This works both ways and is unconstructive. The republicans and the democrats have not secured the tax money that was paid by workers and employers for social security. This is one reason, not the only reason, that these programs are facing fiscal challenges. Several organizations and politicians have used this issue to demonize people that want to fix a system. Our politicians would do the citizens a great service by working to educate the public about the fiscal challenges of these programs and not accuse those who want to fix these issues of starving their grandparents. This has been going on for decades. Stop it already.
In the past year two major changes were made to help stabilize social security. One was to take away a method of filing that benefited a married couple, where one spouse earned more than the other. Another change, late in the year, changed the amount of income subject to social security tax.
 
Both of these measures were changed quietly, without much news coverage or fanfare.
 
Some other proposed changes are being considered.
Raising the full retirement age would lower the amount of years, someone would collect Social Security. This would probably change gradually. Most proposals I have read about would add 3 months to the full retirement age each year, until the full retirement age was 68. These proposals would also let you delay the maximum age until you begin drawing social security to 72.
That shrinks the amount of time between when you start collecting social security, and are seriously considering knee or hip replacement.
You would probably still be able to collect at age 62, but the monthly benefit would be less.
Increasing the amount of income that is subject to social security tax is probably going to happen. In 2016 the amount of income tax subject to social security tax was $118,500. The way it works now is that you pay 6.2% of your wages for social security, and your employer pays 6.2% of your wages for social security. This tax is assessed on the first $118,500 of income. It is a substantial tax.
Starting in 2017, the amount of your payroll subject to social security tax will increase to $127,200. Proposals for improving the fiscal health of social security include raising or uncapping the amount of income subject to social security. Other proposals call for increasing the 6.2% rate.
Means testing is another area under consideration. Means testing is a method of denying some citizens the benefit they paid for, because they have been successful enough and do not need it as much as lower income citizens.
New formulas for calculating COLA, (cost of living increases) are under consideration. This would lower the annual increases provided by social security.
 
Longevity Indexing is another topic being discussed. This would link Social Security benefits to population wide longevity changes. If the population continues to live longer, the Social Security would lower the benefits being paid. This would mean that benefits would fall behind inflation. The older you are, the lower your purchasing power would be. If you combine that with a reformulated COLA, you will have a rapidly diminishing purchasing power.
You may be getting the feeling, and you would be correct, that are not any painless solutions. This is the reason that politicians have a hard time confronting this problem. Try not to attack the messenger, or the people brave enough to suggest some solutions. It is a national problem. We have to be adults, educate ourselves, and encourage our politicians to work together to start fixing the problem. The longer we wait, the more drastic the negative changes will have to be.
In closing, it should be obvious by now that you need to take personal responsibility for your own financial planning for retirement. The government has made promises that they do not have the ability to keep. This will play out in reductions of benefits and increases in taxes. Social Security is the focus of this article. Medicare and some pensions are also suspect.
Now is the time to take your ownership of your retirement plan. Most people need to save more. I have seen people of average means that have excelled in saving for retirement, and I have seen people with high net worth, who have done a poor job saving for retirement. I know it can be done.
I think Social Security will be there for everyone reading this article. But I think a lot of people miscalculate the purchasing power their social security check will have after reduced COLA’s, taxes, and increased Medicare payments.
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I recently returned from a trip to North Carolina. The reason for the trip was simple. We wanted to spend a few days with some friends who do not live near us, and we wanted to enjoy the beautiful countryside without the interruption of all of the news and noise that populates our life.

Our main physical activity was our daily hikes in the mountains. On day 2 we woke to a soaked earth and wet leaves. During the night, the wind and the rain combined to create a slick surface. In addition the trail we were taking featured exposed roots, rocks, and a steep drop off to one side, causing us to make adjustments to how we hike this trail.

We made sure to wear clothes that would keep us dry. We wore shoes that gave us the best grip, and slowed our pace to avoid slipping or falling. Events happen and you have to adjust .

Prior to leaving on this trip, there had been a lot of news regarding social security. In my mind, these stories should create a lot of discussion. I do not think the majority of people are aware of the news.

First came the news that $1.29 million dollars in overpayments and fraud have been paid out through the social security disability program. These overpayments and fraud part of the reason that $150 billion was transferred from the social security fund to pay retirement benefits to the social security fund the pays disability benefits.

The next piece of news was the changing of the amount of taxable income that is subject to social security taxation. Previously an employee and employer were each taxed 6.2% of wages for social security on the first $118,500 of wages. The new amount of wages subject to social security taxation is $127,200. This is an increase of 7.3% and is an event that will necessitate adjustments to me made.

Let us take the example of a small business owner who employees 6 people. The business owner earns a salary of $175,000. The business employs two people that earn $130,000, two people who earn $50,000 and two people that earn $35,000.

In this example the business owner will have to pay an extra $2157.60 in social security taxes for himself and his two employees that earn $130,000. Each of the employees who earn $130,000 will have additional deductions of $1078.80 deducted from their gross pay. The lower wage earners will not see their take home pay altered, however it will be more difficult for the owner to provide a raise or bonus when combining the increase in social security taxes with other increases, such as health care, that are also squeezing cash flow. To the owner of this business, and the two employees that make $130,000, adjustments must be made.

Many business owners’ purpose of growing a business is to sell the business sometime in the future. One way businesses are valued is by cash flow. Different business sell by a certain multiple of cash flow. If a business generates $100,000 of cash flow per year, and that type of business sells at 5 times cash flow, it would be worth $500,000.

In our example, assuming the business sells at 5 times cash flow, this business just lost $10,785 in value. To the owner of this business, adjustments must be made.  

I have not heard any news on adjustments the Social Security Administration is making on reducing fraud or overpayments.

So here is my take away from this blog. If you earn more than $118,000 of income per year, your budget just got hit by a storm, and may become a more slippery trail. If you do not fall into that category, but the person who writes your paycheck does, you are likewise effected, since it will become more of a challenge for your employer to generate the cash flow necessary to justify bonuses and raises.

On the positive side, if you are a recipient of social security, the ability to keep making payments without cuts was just improved. When you work with your financial advisor, become educated about how much of your social security will be available for retirement spending. Do not plan of having it all available.

As the landscape has just shifted it is more important to have a plan, or to update your current plan. If we can help you in the endeavor, please give me a call at Forest Hills Financial.

Bart Steindler

Vice President / COO

Forest Hills Financial

616-949-6006

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As people prepare for retirement, social security is one component of the equation that will be used to determine the amount of retirement income one will have to live on. If saving and planning has come natural, social security can be viewed as a supplement for your retirement.  If you have struggled in saving and properly planning, your dependency on Social Security retirement income will likely be greater. For many of us, retirement will be a substantial time in our life, and planning on how we are going to pay for it is increasingly difficult. With that being said, this is just one of many factors to consider when planning for retirement and more importantly to address your own situation with a professional independent advisor.   

                                                                     

To receive a report on your estimated social security retirement benefits, visit www.socialsecurity.gov/myaccount . Once you have created your account you can then download your estimate.

 

I recently reviewed Social Security benefits and I noticed something new.  On the page that lists your individual estimated benefits, there is an asterisk. Here is what is says:

 

*  “Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2033, the payroll taxes collected will be enough to pay only about 77 percent of scheduled benefits.”

 

The social security administration is saying that the retirement payments citizens have been paying into for their entire work life, is underfunded.  If you are between 10 and 15 years away from collecting a social security retirement check, you may want to consider discounting your estimated payments for the purpose of planning your durable retirement income.

 

In addition, it was reported that the federal government’s safety net program for private pensions is running a near $62 Billion long term deficit.  The Pension Benefit Guaranty Corp. (PBGC) has two separate insurance programs, one for multiemployer plans and a larger one for single employer pension plans.  The multiemployer plans, which has suffered the most, insures benefits for more than 10 million workers.

 

The agency said that the projected long term deficit in its multiemployer program rose to 42.4 billion, compared to 8.3 billion last year. The increase is largely due to the fact that several large multiemployer plans are now projected to become insolvent within the next decade.  Without a significant bailout, the multiemployer federal safety net will likely go bankrupt according to the agency’s annual report. 

 

So here are a few questions for you. When you are planning income for retirement, and a portion of that income is in a government insurance programs like social security, a government insured pension or it is insured by PBGC, how likely is it that you can depend on getting the full amount that you are expecting? Do you know the financial strength of your pension? Are you depending on income from a source that is underfunded?

 

What should you do?  Consult with an independent financial advisor that has a solid reputation for problem solving and is skilled at income distribution. This could be different than the advisor you worked with during the accumulation phase of your life.

Work on developing a plan that makes sense and fits your financial situation.  While I do not believe that all social security benefits or all of the pensions will become worthless, I do believe it is likely that they will become vulnerable to negative adjustments in the future.

 

If you would like to go over your options, you can call my office to set up a no charge, no obligation appointment.  

 

Bart Steindler

Vice President/COO

Forest Hills Financial Inc.

616-949-6006

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