Investment Tips with
Janelle Pavon

2011 Social Security Update

Provided for and courtesy of Janelle Pavon, Financial Advisor

Some politicians are fond of saying that Social Security is broken. We do not have a crystal ball or the ability to see into the future. However, the facts about the trends in Social Security are less than reassuring.

In the past, generally in October every year, the government announced its Social Security cost-of-living benefit increases for the coming year. It usually was accompanied by a fair amount of fanfare. The increases, which include retirement benefits and disability benefits, are tied to the Consumer Price Index, which measures inflation.

In 2010, that hoopla did not take place because there were no scheduled increases. The Social Security Administration announced that in 2011, for the second year in a row, retirees would receive zero increase in their benefits. According to Social Security News, this is the first time that we have seen back-to-back freezes in benefits since automatic cost-of-living increases were started.(2)

In fact, not only is there no inflation, but (thanks mostly to declines in housing prices) we are looking at potential deflation for the first time since The Great Depression.

Article continues on Top Right Column >^

(Investment Tips
Article Part 2)

Monthly benefits - Frozen in time, 2010 benefits are hovering around $1,000 a month. Specifically, according to the SSA’s “Monthly Statistical Snapshot,” the average monthly benefit for retired workers is $1,172. For disabled workers, the benefit is $1,066 a month.(3) This works out to annual benefit payments of slightly more than $14,000.

For those still working, this bad news serves as a reminder that: Social Security was never intended to provide full and comprehensive retirement benefits or to replace all one’s income in the event of a disability.

Benefits, even with periodic cost-of-living increases, were pretty paltry to begin with. Few people can live on $14,000 a year and no one can live well.

Individuals have no control over Social Security. In many respects, it is a political football that gets tossed and booted around by our elected representatives and administrators. Benefits can be changed – increased or decreased – at the whim of Congress, which has already increased threshold retirement ages several times in the past.

No one is going to care as much about your retirement security as you. Social Security is no substitute for making your own strategy for financial security.

Article on 2011 Social Security Update: Part 3

Plan ahead: Consider the following steps to help assure that you will not have to depend on Social Security:

1. Determine how much income you want to receive in retirement – Let’s say, as a hypothetical example, your target is $100,000 a year. Starting with that, along with a projected rate of growth, you can back-end calculate how large a retirement fund you will need to amass before your planned retirement date. Whether you are in your 20s or already in your 50s, this will show you what you need to do to realize your retirement income goals. Review and revise your calculations periodically.

2. Inventory your current assets – Figure your total net worth, including current retirement savings and the value of your home.

3. Calculate how much you need to put into your retirement fund each month – Do not just save willy-nilly, but know the precise amount you must save. If you are fairly young, you may be surprised how little it will take each month to achieve your goals. If you are older, you may have to revise your goals; however, you will still be prepared for retirement even if it will call for a down-sizing of your lifestyle.

See 2011 Social Security Update Part 4 Below...

4. Select financial vehicles wisely – Base those vehicles on your age, needs, goals and risk attitude.

5. Buy long term care insurance – The average annual costs for assisted living across the country is $35,600 per person, while nursing home care averages nearly $67,000.(4) This means you can save hundreds of thousands of dollars for retirement only to watch it disappear if you or your spouse needs nursing home or home health care. That’s why more and more people are looking into LTC coverage to protect their retirement nest egg.

6. Own disability insurance – With Social Security paying less than $1,000 a month in disability benefits, you cannot rely on the government to meet your needs if you become disabled. A quality disability policy can replace up to 60 percent of your income.

The bottom line: Even though Social Security is facing an uncertain future, there is still much you can do to protect yourself and your future. The time to act is now. Call me to set up an appointment to discuss these important financial issues.

Contact Janelle Pavon at...

Janelle Pavon, Office: 973.299.9222 ext. 273
Email:

Website: www.langdonford.com

Reference Materials, Background Info, and terms of Service for the 2011 Social Security Update Article

(1) “Under the Law, No Social Security COLA in 2011,” October 15, 2010. More Info

(2) Social Security News

(3) “Monthly Statistical Snapshot, September 2010,” SSA, More Info

(4) “Genworth 2009 Cost of Care Survey,” Genworth Financial, April 2009.

Securities and investment advisory services are offered through Securian Financial Services, member FINRA/SIPC. Copyright 2010 © Custom Communications Insurance Publishing. Material in this article may not be reprinted without permission. Tracking# 392421 DOFU: 10/2011

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