Will Social Security be enough? How financial advisors can prepare clients

It’s no secret that many people worry whether Social Security will be there for them when they retire.

And recent headlines could be stoking those fears.

Last week, the Social Security Administration announced the annual cost-of-living adjustment will be 1.3% in 2021.

The change will amount to just $20 more per month for a retiree who now receives $1,523 per month.

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Meanwhile, the Covid-19 pandemic is expected to further reduce the trust funds which supports those benefit payments.

The Social Security Administration’s most recent estimates indicate those funds will be depleted in 2035, at which point just 79% of promised benefits will be payable. That timeline could be accelerated now that millions are unemployed and no longer paying Social Security payroll taxes.

For financial advisors, now is the time to educate clients about what those headlines really mean and help them safeguard their retirement plans.

It still pays to wait

Congress could step in

Last week, two Democratic congressman – Reps. Peter DeFazio, D-Ore., and John Larson, D-Conn. – came up with a bill to replace next year’s 1.3% increase with an emergency 3% COLA.

The lawmakers are hoping to have the proposal included in current stimulus talks.

“We hope that it will become part of the negotiations that are ongoing,” DeFazio told CNBC last week.

If that change is not possible now, it could be revisited in January with a new Congress, Franklin said.

“Depending on who controls the Senate and who controls the White House, you may see this reintroduced in January,” Franklin said. “Depending where the politics lie, it may have a chance.”

Proposals are also on the table to restore the program’s solvency. Democrats in Congress have put forward plans aimed at getting the program back on track. Democratic presidential nominee Joe Biden also has a proposal to shore up the system.

It’s likely Congress will make fixes before any significant benefit reductions kick in, Franklin said.

Planning considerations

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