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Are Social Security Benefits Going to be Cut?

Written by Summit Wealth on .

Social Security Chief Actuary Stephen Goss warned a Senate panel today (5/21) that benefits could be cut by 25% if Congress does not act soon. "Changes are needed soon to avert trust fund reserve depletion and an abrupt reduction in the level of benefits," Goss stated in prepared remarks to the Senate Finance Committee.

Goss said that the primary factors leading the shortfall issue in the reserves includes:

  • Longer lives,
  • The huge baby boomer population coming into retirement, and
  • A permanent decline in the historic birth rate from three children per woman to two after 1965, which has, in turn, led to a lower ration of employed workers to support retirement benefits.

After the hearing, Finance Committee Chairman Sherrod Brown indicated that he doesn't believe it is imminent that Congress will approve adjustments to boost the trust fund.
It is for these reasons that we have been predicting a 50% cut in Social Security benefits in the retirement projections we are preparing for pre-retirees. Buckle up and stay tuned folks as we aren't convinced this is over yet!!


Increase in Minnesota Estate Tax Exemption

Written by Summit Wealth on .

For those of you that haven't already heard, the Minnesota estate tax exemption is increasing (effective immediately) over the next five years, from $1.2 million in 2014 to $2 million per person in 2018. The Minnesota estate tax rate ranges from 9% to 16% for estates over the $2 million exemption amount. This makes it even more important for those folks with estates in excess of $1 million to have their estate plan documents reviewed periodically to minimize / eliminate potential Minnesota estate tax from their estate.

Note that the federal estate tax exemption is currently $5,340,000 per person for 2014 and is separate from the Minnesota estate tax. The federal exemption is portable in that it allows a surviving spouse to use a deceased spouse's unused estate tax exclusion (up to the $5.34 million). Unfortunately, the Minnesota estate tax exemption is not portable, causing a greater need for planning around the exemption amount.


1st Quarter 2014 Earnings Reports for S&P 500 Companies:

Written by Summit Wealth on .

Approximately 92% of the S&P 500 companies have reported earnings for the first quarter (as of 5/8/14). Total earnings for those companies is up 1.6% from the same period last year on a +0.6% increase in revenue. Approximately 69% of those companies beat their Earnings per Share estimates and about 50% have come out with positive revenue surprises.

These figures would have actually been significantly better if the Finance sector wasn’t such a drag on earnings. If we exclude the Finance Sector from the reported first quarter results, total earnings would have been up 4.0 and the revenue increase number would have been +3.3%.

For the first five weeks of the second quarter of 2014, we have seen earnings revisions of -2.2%, which is a lower drop than the 3.3% drop in the second quarter of 2013. It is also below the 3.1% drop for the comparable period of the first quarter of 2014.

There are no facts or circumstances in these numbers that would lead us to believe that a considerable, sustained pull-back is coming for the markets. However, stay tuned as this information does (and will likely) change.


The Impact Inflation Has on Your Retirement

Written by Summit Wealth on .

Ben Bernanke and the Federal Reserve are looking to keep inflation at about 2% per year (see linked Wall Street Journal article), which, in my opinion would be a welcome sight!!  While I don’t know the specifics of each person’s spending habits, I am quite sure that many of the good and services my family spends our hard-earned dollars on have surely increased by more than 2% per year over the last several years.  Let’s take a look at a few of them and how they impact my (and your) retirement:


Should You Depend on Social Security?

Written by Summit Wealth on .

Per the most recent Social Security Board of Trustees report, the Old-Age and Survivors Insurance and Disability Insurance trusts will likely be exhausted in 2036.  What this means is, as things stand today, Social Security beneficiaries can expect to receive about 77% of scheduled benefits after that point.

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