19 Years Until Social Security Trust Fund Runs Out
// AICPA Insights
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The government is projecting that the Social Security Trust Fund could run out of cash by 2033. While 19 years might sound like a long time, many of us have clients in their 30s and 40s who want to know that they'll receive all of the Social Security benefits due to them when they retire. Of course, CPAs and those of us who offer financial planning and estate services caution our clients not to depend solely on their Social Security checks to carry them through their later years.
It's alarming that the money may, indeed, run out—and even though this news is nothing different that what we've already heard about the money—I can't help wondering how many Americans aren't familiar with how dire the situation may be.
In late July, the Social Security Administration released its Board of Trustees annual report to Congress on the long-term financial status of the Social Security Trust Funds. According to the SSA, the combined asset reserves of the Old-Age and Survivors Insurance, and Disability Insurance, are projected to be depleted in 2033, at which time 77 percent of benefits will be payable. Perhaps, though, more alarming, is the announcement that the DI Trust Fund will run out in 2016, with 81 percent of benefits payable.
Two other statements were included in the report:
- The combined trust fund reserves are still growing and will continue to do so through 2019. Beginning with 2020, the cost of the program is projected to exceed income.
- The projected actuarial deficit over the 75-year long-range period is 2.88 percent of taxable payroll – a 0.16 percentage point larger than in last year's report.
As a CPA, what can you do to help your clients? It's not exactly a time to panic, but it's our job to inform and educate our clients on what the reality is and how they can come to terms with retirement planning. Of course, there are lots of ways to plan for retirement—and the sooner, the better. Still, it's difficult to convince a Millennial or Gen-Xer that they need to look ahead some 30 to 40 years and realize they probably need more money than they thought they would need to retire and live a certain lifestyle. It also may be even more difficult to tell a 65-year-old man or woman that they won't have enough money to last their lifetime.
The key is to find the time to sit down with your clients and help them plan for the future. If you're one of thousands of CPA personal financial planners, with or without the personal financial specialist (CPA/PFS) credential, you're already in a unique position to advise them on what they ought to do.
Conversely, if you're a CPA providing tax and accounting services, you already know what your clients have in savings and investments, but you may not have the expertise to give advice on retirement planning. If this is the case, partner or consult with a CPA financial planner or CPA/PFS. What this boils down to is a matter of trust; your clients will trust you for being proactive with them rather than letting them figure this out on their own.
The AICPA's PFP Section has comprehensive resources with guides, articles and archived webcasts from national experts on retirement planning and many other areas. PFP resources include The CPA's Guide to Social Security Planning -- a practical guide for CPAs as they help their clients make decisions about Social Security – featuring plainly stated information, commonly asked client questions and advisor solutions, and references to SSA publications for more details (free for PFP/PFS members, with an excerpt for non-members).
Theodore J. Sarenski, CPA/PFS, CFP, AEP, CEO and President, Blue Ocean Strategic Capital, Inc. Ted's firm specializes in delivering customized service for individuals, retirement plans, non-profit organizations, endowments and foundations.
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