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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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By the time you are in your 30’s you should be on the road to building a solid financial future. Whether you think you don’t have the means to save or continue putting it off and will “save later” keep this in mind; more than one-third of American’s don’t have anything saved for retirement. (US Department of Labor) Many of you that are younger may find investing interesting, but not sure where to begin. Below are six great ideas of what you should be doing to prepare for retirement as young as 30. 
1. Paychecks Save at least 15% of your income on an annual basis. You can even automate it, so saving is systematic. 
2. Guard against lifestyle inflation. As your career grows, your salary is likely to grow. Yet, just because you have more money in the bank, doesn’t mean you should spend it all. Each time you get a salary bump, increase the amount you save.
3. Start envisioning your retirement. Your retirement may be years away, but having an idea of the kind of life you want during retirement is extremely important. Do you want to travel the world or spend time with family? Really think about the things you may want to do and the lifestyle you want. Keep in mind that you are saving now for the life you want later. 
4. Pay attention to taxes. Taxes are not only a significant amount of your income, but they are a sure thing. Take a solid look at your accounts and options, and do the math. Paying taxes today rather than in the future may be more beneficial.
5. Rebalance your investments every 6 months. Invest in a well-diversified portfolio allocation based on your time horizon and risk tolerance. Every six months do a rebalance and make sure you are back in line with your intended allocation. Six months is a good check in to make sure you are sticking to your plan to reach your retirement goals.
6. Learn to negotiate. Research what similar companies and positions are paying as well as what added skills people in a similar position may have. Take the time to continuously invest and hone in on your skills. Negotiate and strategize with your employer to build the income you desire. Whether you have a salary of 30 or 300 thousand, the numbers will run the same. It is pivotal to not only start saving for retirement as early as you can, but to also understand how much you really need. Call today to meet with an Independent Financial Advisor for your complimentary review.
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Both, Clients and Financial Advisors, need to be on the same page in order to work together effectively. The start of the New Year is a good time to discover whether your resolutions are compatible.

So, whether you are looking for a financial advisor for the first time, reassessing the one you’re working with or looking to work with someone new, be sure to ask to speak with current and past clients of the advisor you are considering working with.  Get as much information about the successes, experience, education and ongoing training of the advisor that you can. If you are reassessing, be honest and tell your current advisor why you are reconsidering the relationship if appropriate. It’s your life and your money, so be committed to understanding everything your advisor suggests before diving in to a specific course of action. If you don’t understand something, keep asking questions until you do understand.

Before interviewing prospective Financial Advisors resolve to know what a client’s objectives are and what the responsibilities of the advisor are in relationship to those objectives.


-Get a plan

-Beware of Proprietary Products

-Know Your: Fees, Investments, Strategy

-Increase savings target

Financial Advisor:

-Put Plans together for clients

-Become Independent

-Make sure your clients know their: Fees, Investments, Strategy

-Reassess savings amounts to make sure they’re on target

Working with an experienced, successful financial advisor can help you meet and often times exceed your financial goals. Advisors have knowledge of and access to investment strategies and information that the everyday person doesn’t have. Don’t be pushed into proprietary products. This won’t happen when you work with an independent advisor. Here’s wishing you great financial health this year and all the years to come.

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The beginning of a New Year is the best time to establish your investment strategy for the year. If you work with a financial advisor, it’s important that you are both on the same page, so this is a great time to see if your resolutions are aligned.

If you are the client of a Financial Planner or are looking to hire one, the first and most important step is to set a resolution to Get a Plan. That means establishing your financial objectives, deciding where you want to end up and how much you can comfortably contribute to your plan on a regular basis along the way.

If you are a financial advisor, it’s integral that your resolution includes putting together workable plans for your clients based on their plans and objectives. You’ll want to remind your clients that as their income increases they may want to contribute more in order to reach their goals ahead of time and with greater assets than they originally thought was achievable.

Next, as a client, you’ll want to be on the lookout for financial advisors who are suggesting financial products proprietary to their firms. Avoid these advisors at all costs. And they will cost you because they get commissions for promoting and selling their firm’s products. One way to avoid this is to look for an independent financial advisor. An advisor who is not affiliated with a particular firm or fund is going to have access to all products and will select only those that best serve your needs.

As a financial advisor you know that when working with a particular firm your primary job is to sell the products affiliated with that firm. You get paid commissions on those products. If you’re really good at what you do and are looking to serve the needs of clients, become an Independent Financial Advisor. Today, clients are savvy and will seek the services of good independent advisors with exceptional track records over those advisors simply pushing a specific product.

Thirdly, as a client, it is your business to know what the fees are associated with your investments and with working with your advisor. Additionally you must be honest with your advisor and make sure you understand the investments your advisor is suggesting for you. Don’t say you understand if you don’t. A good advisor will explain everything until it is understood.  And, you should have a strategy that you arrive at with your advisor for achieving your financial goals within a specific time frame. Your advisor needs to be held accountable if you are not meeting your goals.

As a financial advisor, you want to make sure your clients are clear about their fees. It’s your job to explain the specific investments, work with your clients to establish an achievable financial strategy and explain the investments.

And, last but not least, whenever you can, increase your savings in order to achieve your financial goals within your desired time frame or sooner. Your advisor should reassess savings amounts from time to time throughout the year in order to make sure you are on target.

It’s a new year and whether you are looking for a financial advisor for the first time, reassessing the one you’re working with or looking to work with someone new, be sure to speak with current customers and get as much information as you can before making a commitment. May you have a prosperous New Year.

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