Wednesday, 30 November 2016 00:00

How to Boost Your Social Security Check by 85%

(Washington)

Social Security is a mystery to many, especially how payouts change if you defer. This article acts as a guide to how maximize your social security payout. The first thing to know is that Uncle Sam has big financial incentives on offer if you defer your payouts until after age 62. You get a 7% payout boost per year for each year you defer (in addition to cost of living increases), which amounts to a 76% higher check if you wait until you are 70. However, the payout can be even higher than that if you have gaps in your work history. Because the system bases payouts on your best 35 earning years, those who have years with no income can significantly boost their payouts if they keep working longer. One of the big counterpoints to weigh, however, is how long you will live, which is obviously unknowable. If you were to live to 100, waiting until 70 for payouts is a no-brainer, but if you were to only live to 71, taking checks at 62 makes sense.


FINSUM: Social security is a complex maze for most (which is why people need an adviser), but this article does a good job elucidating some of the program’s finer points.

Source: Bloomberg

Published in Wealth Management
Tuesday, 15 November 2016 00:00

How Retirement Policy Will Look Under Trump

(Washington)

We have documented that Donald Trump looks likely to repeal the new Department of Labor fiduciary rule, but this piece takes a more expansive view and considers how retirement policy will change under the new administration. The first thing to know is that Trump has not said much about Social Security and retirement policy, other than the fact he does not plan to change any existing benefits or the taxes which support them. He does, however, see growth as the key to strengthening the aging system, which is forecasted to be unable to full benefits starting in 2034. Trump has not commented so far on what his exact policies may be, but in 2000, in a book he authored called “The America We Deserve”, he favored privatizing social security accounts that retirees could invest on their own.


FINSUM: It is as yet unclear what Trump’s policies will be here, but it is certainly a major area to watch.

Source: Wall Street Journal

Published in Wealth Management

(New York)

This Bloomberg article warns retirement savers, and by extension their advisers, to be very worried about the next ten years. The reason why is that return expectations and the likely reality of future returns are out of sync. While everyone recognizes that returns will likely be below the historical standard, the piece says that even hoping for 5% per year is utterly hopeless. According to a new Research Affiliates report, “the ubiquitous 60/40 U.S. portfolio has a 0% probability of achieving a 5% or greater annualized real return”. The piece sums up the rather dire outlook this way, saying “If the retirement calculators say we’ll make 6 percent or 7 percent, and people saved based on that but only make 3 percent, they’re going to have a massive shortfall … They’ll have to work longer or retire with a substantially different standard of living than they thought they would have.”


FINSUM: It sounds like the next crisis may not be only a markets one but a social one, where the government is forced to massively bailout pensions and retirement savers.

Source: Bloomberg

Published in Wealth Management

(New York)

Morgan Stanley appears to be gearing up for a fight as it is bucking the trend followed by other big brokers. In contrast to Bank of America Merrill Lynch, Morgan Stanley has announced that it will continue to allow its customers to pay for retirement advice via commissions. Other big brokers have grown scared of the new fiduciary rule and have scrapped such programs, but Morgan Stanley is sticking to the model. The fiduciary rule does have some provisions that allow for commissioned based advice, but other brokers have been scared of the grey area. The move could help Morgan Stanley retain or gain clients, as commission based fees amount to a lower total expense for clients who trade infrequently. It may also help the firm poach brokers stuck at firms which have scrapped commissions.


FINSUM: This is a brave move by Morgan Stanley and one that appears like it could work in their favor. It will be interesting to see if they draw the ire of regulators.

Source: Wall Street Journal

Published in Wealth Management

(New York)

This article reinforces a point that financial advisers are going to have to hammer home to clients in coming years—that they need to significantly increase their savings rate. Common achievable guidance has been for retirements savers to put away 8% of their income and invest in a retirement portfolio. However, with market returns running so low, and looking likely to continue to, clients will need to put away a lot more—perhaps double— to achieve a comfortable retirement. If returns average 2% lower than in the past, then savers will need to put a lot more away in order to meet their financial goals, or 15% to end up with the same pot of money.


FINSUM: This article, which was written by an adviser and published in the WSJ, essentially urges people to embrace (or rather, give in) to the new paradigm of low returns and endure the pain of saving now for a better retirement later.

Source: Wall Street Journal

Published in Wealth Management
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