Here’s How Much Fixing Social Security Could Cost Your Clients
October 8, 2024 by John Manganaro
It’s common knowledge among financial advisors and their clients that, unless changes are made to address Social Security’s current funding shortfall, retirees will face a significant reduction in benefits in about a decade.
What is less understood, according to HealthView Services CEO Ron Mastrogiovanni, is just how big of a benefit cut could be in store — and how much workers at different life stages stand to lose. Industry pros have also lacked insight into the likely effect on tax burdens and benefit payments of the many different potential fixes for Social Security solvency in real dollar terms.
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Wink’s Moore on the Market: Here’s what I learned from this article:
– If benefits are reduced by 21% (consistent with current Social Security funding expectations), a mass affluent couple 25 years from retirement risks losing upwards of $908,000 in future Social Security benefits.
– …doing nothing [about Social Security] will have the greatest cost in terms of dollars lost for future retirees. But there are also big potential effects when considering possibilities such as changing the full retirement age, reducing cost-of-living adjustments, raising the cap on taxable wages or lowering spousal benefits.
– Delaying the Future Retirement Age for future retirees by one year from 67 to 68 would cost a mass affluent couple retiring in 25 years, claiming Social Security at 65 years old, some $325,000 in lifetime benefits.
– For a mass affluent couple retiring in 25 years, this would mean a reduction of almost $287,000 in lifetime benefits.
– …raising employees and employers’ FICA tax from 6.2% to 8% would address the Social Security funding shortfall at a stroke -sjm
