The Boards of Trustees for Social Security and Medicare released their annual financial reports on August 5, warning that while the outlook for Medicare has “improved substantially,” that for Social Security is “little changed” from last year, with the short-term outlook “worsened by a deeper recession than was projected last year.” Secretary of the Treasury Timothy Geithner said that Social Security benefit payments are expected to exceed tax revenue for the first time this year, six years earlier than was projected last year, but that “the improving economy is expected to result in a rough balance between Social Security taxes and expenditures for several years before the retirement of the baby boom generation swells the beneficiary population and causes deficits to grow rapidly.” Geithner said that tax and interest income should be sufficient to pay benefits through 2024, “after which the Trust Fund will be drawn down until depleted in 2037,” the same exhaustion date that was projected in 2009.
Morningstar’s latest series of target-date ratings and reports for 20 of the largest target-date series concluded that with more than $270 billion in assets as of June 30, “target-date funds are quickly becoming the primary retirement savings vehicle for many 401(k) participants.” The reports note that portfolio managers of several series have made changes designed to limit the volatility of returns, and that the funds’ average expense ratio declined to 0.88% from 0.91% a year earlier for those target-date series that are at least 18 months old.
An Insured Retirement Institute (IRI) report found that boomer households that are more than five years out from retiring consider “living within a fixed income” to be their top retirement focus. A key finding for advisors: this group prefers to receive advice face-to-face and not electronically. Pessimism marks this group’s overall attitude toward retirement, however, with six out of 10 expressing concern about outliving their savings and investments and seven out of 10 “afraid” that their household is not saving enough to cover future needs. IRI President and CEO Cathy Weatherford noted that “despite its perilous state, our survey found that more than half of all unretired boomers plan to rely on Social Security for their retirement income.”