COVID-19 fear and COVID-19 fatigue are very real — as-is the general ping-ponging nature of daily life we are all experiencing.
We all wish this turbulent period was over — but it is not, and will not be soon. Many of the issues and changes are going to be around for a long time.
Telehealth use, contactless payments, working from home and a new emphasis on environmental, social and governance investing aren’t going anywhere.
But one area I’m particularly concerned about as a long-term threat is Social Security. While retirement assets have held up well so far thanks to the liquidity generated by monetary stimulus from the Federal Reserve and fiscal stimulus from the federal government, that is all poised to change.
Millennials Get Old, Too
One of the biggest problems with Social Security is that it’s not funded properly. This poses a problem for younger demographics — specifically millennials and Generation Z — in which changes need to be made lest they bear the burden of receiving less than they put in, come retirement.
A number of proposals to ensure it is there for younger contributors when they retire seem to be perennially floating in Congress, but so far nothing is set in stone.
If you’re advising clientele of a younger demographic, you need to be explaining to them why they need to care. These generations need to be talking about this issue.
Many of them, ironically and despairingly, think Social Security is going to be gone by the time they retire, which could very well be creating a self-fulfilling prophecy. If Congress doesn’t home in on this soon, they’ll wait until there’s a full-blown crisis, and even then the solution may not work perfectly.
Born in 1960? You Have a Problem
Social Security is often talked about as under threat, with actuaries forecasting the system to go bankrupt in the future — yet as of now, Social Security has never missed a payment or cut benefits.
Many people don’t realize that payouts are determined by the Average Wage Index, which is now being impacted by current and rampant pay cuts, layoffs and furloughs.
If Congress does not act to address this issue, citizens born in 1960 (and likely 1961) will see a nearly 15% cut to their lifetime benefits from Social Security when it’s time for them to collect.