It’s astonishing to us that more than 10,000 people in the U.S. turn 65 every day, and that number will peak at about 12,000 in the summer of 2024. As we reflect on this fact and think about the future, we can see how this demographic bubble will affect everything from healthcare to the composition of the workforce to the future of Social Security and Medicare. We want to share with you a few thoughts from the recent Investor’s Business Daily article “Baby Boomers Are Hitting Peak 65. What It Means for Retirement Planning.”
Retirement for boomers is different than it was for their parents in the so-called Silent Generation. Life expectancy has improved, and today's 65-year-old can expect to live at least another 20 years. About 80% of households with older adults — or 47 million such households — are struggling today with money. And they risk falling into economic insecurity as they age (Stanley, 2023).
"With the U.S. experiencing the greatest retirement surge in its history, the country's public and private-sector retirement systems have become obsolete. The old metaphor of the three-legged stool of retirement planning — employer pensions, personal savings and Social Security — no longer holds," said Jason Fichtner, chief economist at the Bipartisan Policy Center (Stanley, 2023).
The good news: Smart investing choices will make your retirement savings last a lot longer and generate more income.
While the ranks of retirees in the U.S. are growing, pressure continues to rise on traditional sources of retirement income. This year, trustees for Social Security and Medicare calculate that Social Security will be able to pay 100% of scheduled benefits until 2033. Without additional funding, benefits would fall after that. The Hospital Insurance Trust Fund, the main fund for Medicare, is expected to pay 100% of benefits until 2031.
According to the Social Security Administration, the past 12 annual Trustees Reports have signaled that Social Security's reserves would be depleted between 2033 and 2035. "If no legislative change is enacted, scheduled tax revenues will be sufficient to pay only about three-fourths of the scheduled benefits after trust fund depletion," the SSA says.
A major reason the current Social Security program has become unsustainable is the number of workers contributing to the program is growing more slowly than the number of beneficiaries receiving monthly payments, according to the Peter G. Peterson Foundation, a nonpartisan economic policy think tank,
So, we’ve been asked, “What can retirement savers and retirees do?”
There's no single answer. To us, the two biggest threats to financial security in retirement are, for most people, longevity and purchasing power. The challenge is finding the right balance among investing strategies.
Dividends are great, but "simply investing in dividend stocks won't guarantee that you won't outlive your money. You might have to reduce your standard of living," says Robert Powell, a certified financial planner and editor of Retirement Daily. "Annuities can protect against longevity risk but can't guarantee you won't lose purchasing power."
Recent research illustrates how traditional approaches to retirement investing aren’t keeping up so well in this new millennium either. One approach, the 60 / 40 portfolio, where 60% is invested in stocks and 40% in bonds has not performed as well as it did in the 80’s and 90’s thanks to historically low interest rates in the past decades and a series of bear markets.
Researchers have been reconsidering another traditional approach: the declining equity glide path in retirement planning. The declining equity glide path is known as the "100-minus-your-age" calculation. That means if you are 70, you would have just 30% of your portfolio in equities. The formula is designed to reduce equity risk as you age.
But for many who are investing for and living in retirement, leaning into active investing — and equities — could be better.
Director of research for Morningstar Research Services John Rekenthaler says Americans, on average, are wealthier than they have ever been, especially within the investor class. Investors have more assets. That, combined with long bull markets and weak competition from bonds, means "stocks became the only legitimate game in town. And investors very much noticed," he said.
At Curran Wealth Management, we understand the importance of investing in equities. Our Private Wealth Managers (PWM) provide retirement planning services while acting as a calming force, keeping our clients confident and informed during uncertain times. Our PWM’s retirement planning toolbox includes a portfolio analysis that runs multiple simulations of your financial plan against future market conditions. The result of introducing random investment volatility to the analysis produces a range of values that demonstrate how changing investment markets may impact your retirement plan, including its longevity and purchasing power. If you are not yet a Curran Wealth client, feel free to reach out to us today at info@curranllc.com to discuss how Curran can help you take control of your financial future.
Best,
At Curran we value service over sales and believe quality service yields happy clients. Below is our 4-step process (the first three steps at no cost to you).
A short introductory call for us to get to know one other. During this call we will discuss your financial goals, concerns and hopes for the future.
In this meeting we will go over your current financial situation, take a deeper look at your goals, discuss your risk tolerances, and collect the data necessary to build a formal proposal.
Based on our data gathering session, our Private Wealth Managers will present you with a custom proposal tailored to your needs. We encourage individuals to take the time to evaluate this proposal.
If you are comfortable with the proposal and choose to invest with Curran, our team will be there every step of the way assisting in opening the recommended accounts and facilitating all necessary parts of your onboarding process.
