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Carson Group executive Jamie Hopkins

Retirement Planning > Social Security > Claiming Strategies

Jamie Hopkins: Congress Will Fix Social Security — Eventually

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What You Need to Know

  • Retirement expert Jamie Hopkins of Carson Group discusses how current events are affecting retirement portfolios.
  • TIPS and I-Bonds are good ways to protect portfolios from inflation, he says.
  • Hopkins says CPI-E would be a better index for calculating Social Security COLAs.

A jump in inflation, a volatile stock market and low interest rates are a combustible mix to blow up even the most carefully constructed retirement portfolios.

In our ongoing VIP series, we asked Jamie Hopkins to give us his thoughts on these matters, as well as if Congress will fix Social Security.

Hopkins is a lawyer, certified financial planner, and managing partner of wealth solutions at Carson Group. He is also a retirement income planning expert and the author of “Rewirement: Rewiring the Way You Think About Retirement!

We asked him our series of questions on today’s events and how that could affect retirees and portfolio planning going forward.

1. Inflation has jumped 7.9% over the last 12 months. How would you counsel advisors to prepare clients for either pre- or post-retirement portfolios with this threat? What are the best options now?

Inflation today represents a big challenge with low interest rates. Staying in the market can be a good way to combat inflation overall, but if interest rates rise, one risk is that market returns often suffer when interest rates are moving up.

Another option is to look at companies that can raise prices during periods of higher inflation.  Look at TIPS and I-Bonds today — as both provide some inflation protections.

I would also encourage most people to take a measured approach and not overreact and try to predict the future. The markets can outlast you. It’s important to remember that.

2. The Social Security COLA, which was raised to 5.9% this year, is lagging current inflation rates. What is the best way for advisors to help retirees to counteract the crunch they are taking to their Social Security benefits (especially if they already are collecting benefits)?

Social Security is not a perfect inflation protection asset, but it is about as good as there is out there. Remember, the 5.9% was for last year, and if inflation is higher this year, it will adjust for next year.

In the past, seniors often saw higher inflation rates than the general population; it is possible those tides have turned a bit this year and seniors might see lower inflation rates than the general U.S. population. Deferring Social Security is still a good way to deal with inflation and running out of money.

3. What is your opinion on whether the COLA index should be changed from the Consumer Price Index for Urban Wage Earners and Clerical Workers to the CPI for the Elderly?

The CPI-E is a better way to run Social Security COLA adjustments. In the past, it has been higher than the CPI-W, but it cannot always be this way. Using the CPI-E more aligns with the goal of Social Security, to provide retirement income that lasts a life and adjusts for inflation to keep people out of poverty.

4. What lessons can advisors/clients learn from today’s volatility mixed with higher inflation and the impact on portfolios? Are there any products they should incorporate into portfolios now?

I always go back to diversification and planning. Know why you are spending, why you are saving and why you are investing. If you don’t know the why behind your actions, you will end up with a portfolio and strategy with no meaning.

5. Do you believe that Congress will step up and make changes to Social Security, including making the appropriate funding, in the next couple of years? Why or why not?

Congress will fix Social Security, but it is not likely to occur in 2022 or even 2023. The issue is there, but a lot [of leaders] in D.C. see it as an issue that can be dealt with in the future. There is also just not enough agreement in how to fix Social Security in D.C. It should be a mix of taxes, cuts and expansions of benefits — but the mix of each has no consensus today.


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