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Retirement Roundup: Don’t Count on Social Security

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A digest of timely information and insight about finance, investing, and retirement.

This is why you shouldn’t count on Social Security | MarketWatch
The Social Security system is expected to be exhausted by the early 2030s, experts say. Americans are still paying into the system every paycheck. What will happen, however, will be a cut to the benefits Americans receive. The government has noticed. The Social Security Administration put out a note last year saying Social Security and Medicare are both facing long-term shortfalls under the current structure, and that they together accounted for 42 percent of federal program expenditures in the fiscal year of 2016. In its 82 years, Social Security alone has collected almost $20 trillion — and it’s already paid out $17.1 trillion, leaving about $2.8 trillion in its two accounts (the Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund) at the end of last year. The government expects the accounts to steadily decline until they are depleted in 2034. Last December, the House Ways and Means Social Security Subcommittee Chairman proposed a 31 percent cut in benefits as one way to relieve this over-exhaustion.

What the battle over 401(k) plans means for your retirementCNBC
Any changes to taxes on your 401(k) savings won’t change two key tenets of planning for retirement: Save early and save as much as possible. That’s according to retirement experts even as 401(k) plans have gotten drawn into the tax-reform debate in Washington. Right now, workers who have access to 401(k) plans will be able to invest up to $18,500 next year, while participants age 50 and over will be able to put away $6,000 more. Under current rules, investors will not pay taxes on those contributions until a later date. That could all change if some lawmakers have their way. Limits for pretax contributions to 401(k) plans could be lowered to $2,400 as Congress looks to make up for other tax cuts.

Op-Ed: There’s a better solution on pensions | Lexington Herald-Leader
Proposed pension reforms in Kentucky leave in place the huge unfunded liability of anywhere from $33 billion to $84 billion. The General Assembly and local governments will have to find about $1 billion and $400 million, respectively, of additional revenue (taxes) or spending cuts each year, causing additional strains on Kentucky’s beleaguered public institutions and services. The impoverished state, full of talented and industrious citizens, will only be further impoverished. When the next downturn in the economy occurs, Kentucky’s bond ratings will be further reduced.

The Difference Between Retirement and Successful Aging | Forbes
While retirement may provide more time to work out and prepare healthier meals, it doesn’t come with any special fairy dust that suddenly provides extra motivation, desire, or discipline. In fact, retirement tends to magnify the existing behaviors and habits of people, not change them. Therefore, retirement doesn’t foster or lead to successful aging; it can actually work against it.

Americans’ Greatest Fear About Aging is Covering Long Term Care Costs | PLANSPONSOR
Not having enough money to pay for health care or long-term care is the greatest fear adults have about aging, Genworth found in a survey of 1,200 people. Despite these overwhelming apprehensions, only 20 percent of Americans have taken any steps towards figuring out how to finance or actually financing long-term care costs. In addition, only 50 percent feel they should be responsible for their own care as they age, with the remainder feeling it is the responsibility of the government, their family or community or faith-based organizations.

Ted Benna, father of the 401(k), thinks tax reform that favors Roth plans is ‘pretty stupid’ | Pensions & Investments
Ted Benna was a pioneer of the 401(k) plan, having developed the concept of pre-tax 401(k) deferrals. He adopted the first-ever 401(k) savings plan in 1981 for the Johnson Cos., where he worked as a retirement benefit consultant. Now, debate is swirling on Capitol Hill to reduce the pre-tax contribution limit from the current $18,000 annual limit as part of a Republican tax reform package set to be unveiled this week. Any contributions beyond the pre-tax limit would be mandated to go to Roth, or after-tax, accounts, a policy known as “Rothification.”

“I think it’s pretty stupid in terms of retirement policy,” Mr. Benna, now a consultant at an eponymous firm, told InvestmentNews. “There’s major concern about a retirement crisis that’s staring us in the face. (The 401(k) plan) is the plan, whether people like it or hate it, that’s the primary way for the average American to be saving for retirement.”

Unfunded liabilityThe difference between the projected amount of money needed to pay benefits earned to date and the amount of money currently available to pay those benefits.

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