The American Retirement Dream Is Not Dead

American retirees are screwed. The 401(k) experiment has failed. Social Security’s going bust. Savers haven’t saved nearly enough and don’t have the means to improve the situation.

However hyperbolic, this is the message that has been sent and, for many, is indeed the way it feels. But how do the facts feel?

Pension Facts:

  • Many companies have abdicated the role they once played in helping support employees’ retirements through defined benefit pension plans by promoting and then under-supporting defined contribution plans, like the 401(k).
  • Most pensions that remain — even those run by states and municipalities — are “upside down,” lacking sufficient funds to pay what they’ve promised. The entity conceived to insure underfunded pension plans is also underfunded.

401(k) Facts:

  • Some large financial firms have filled many of the 401(k) plans they manage with overpriced, underperforming funds, and offered little in the form of substantive education for the masses now left to their own devices.
  • After a six-year effort to ensure that financial advisors who manage retirement assets would be required to act in the best interests of their clients, there’s a corporate and political movement afoot for firms to reclaim potential lost profits if they were forced to do right by their clients.
  • Even some of the individuals who initially conceived the 401(k) concept and lobbied for it have recanted their support, regretting it ever started.

Social Security Facts:

  • The program intended only to be a safety net has become the primary financial resource in retirement for too many.
  • The surplus funds received when the huge baby boomer generation paid in — which are now being used to help replace the inherent shortfall of smaller generations — are projected to run out in 2034, thereby reducing the system’s ability to pay benefits by 25 percent.

There — how does that feel, now?

Save Social Security For When You Need It Most–Later

Originally published CNBCI think we’ve been looking at Social Security retirement benefits all wrong. In the long-running debate about when to take Social Security — as early as age 62 or as late as age 70 — the focus has been on timing your claim to get the most money, in total, out of the social safety net.

This is a circular argument that will never be fully decided until the Social Security recipient in question dies. So let’s shift the focus from the question “How do we get the most out of Social Security?” to “How do we get Social Security when we need it most?”

Simply put, you’re more likely to run out of money at the end of retirement than at the beginning.

Congress Eliminates Two Popular (and Profitable) Social Security Claiming Strategies

The Bad News & The Good News

Originally published CNBCLast week, the world of retirement planning experienced the financial equivalent of a deafening record scratch, courtesy of a Congressional move to end two well-used Social Security claiming strategies. In a matter of months, “File-and-Suspend” and “Restricted Application,” which were on the verge of retirement planning rock-star status, will only be referred to in the past tense.

“File-and-Suspend” and “Restricted Application” — let’s just call them “FASRA,” because it’s not like there aren’t already enough government-related acronyms — were, Congress argues, unintended consequences of the Senior Citizens Freedom to Work Act.

3 Ways To Spend Your Social Security “Bonus”

Yes, it’s that time of year again, when the air becomes cool and crisp; when football, jeans and sweaters are back in season; and when many working Americans blessed with higher incomes find more of their hard-earned dollars in their paychecks.  Why?  Because the maximum taxable earnings for Social Security (OASDI) taxes is capped at $110,100.  Everything you make over that number is still reduced for federal and state income taxes as well as Medicare, but the 4.2% Social Security tax is avoided.

So what to do with this “found money”?  We’re talking about amounts worthy of deliberation here, so the only real sin would be to do nothing—to be knowingly (or unknowingly) ignorant of the bonus and allow it to slosh around in your checking account earning .0000001% only to get incidentally gobbled up by the discretionary cash monster that is life.  I don’t care so much how you use it, but that you use it for a purpose.  Consider, then, applying your bonus to one or all of the following: SAVING, SHARING or SPENDING.

Sound elementary?  Like the advice your grandfather gave you when you were seven or the advice you’ve given your kids?  Simple, yes, but it’s not easy.  One of the timeless truths of personal finance is that a balanced approach to these three objectives benefits everyone, regardless of the number of zeros on your personal balance sheet or income statement.


The inverse of savings is debt, and in an interest rate environment where your cash savings is almost certainly earning less than you are paying on any debt, the primary goal of your Social Security bonus should be to accelerate your debt repayment on any bad debt.  There is no “good debt”—only bad debt and better debt.  Bad debt is a loan on a depreciating asset—like a car, couch or TV—and worse debt is that which is revolving, like credit cards.

If you’re fortunate enough to not have any bad debt, how are you doing on liquid savings—savings that is either in pure cash or invested in stocks, bonds and mutual funds outside of retirement accounts?  If you’re in a dual-income household with stable salaries, consider maintaining three months of living expenses in pure cash.  If you’re a single income household or your income is volatile, consider six months; and if you’re self-employed, I’d like to see you sitting on a year’s worth of expenses.  If you’re falling short in this category, your Social Security bonus is a great way to pad the financial margin that you WILL need at some point.


Giving is without a doubt the most underrated financial to-do on most of our lists.  Despite the inherent personal benefits, we tend to see giving as something that moves us backward financially, but the benefits of giving are not merely enjoyed by recipients.  Anyone who’s ever engaged in mindful giving can likely speak to the proverbial truth that “it is better to give than receive,” but this ancient saying is now growing toward consensus within the realm of financial pros and the medical community, as Carl Richards articulated so well in his recent article (and drawing), “Spending Your Money to Make Someone Else Happy.”

But in addition to the evidence that “it’ll make you feel good,” giving also has financial benefits.  When we better acquaint ourselves with the needs of others, we have a tendency to treat ourselves to fewer $6 coffees and $5,000 suits, and find more cash in the coffers.  But in the case of your Social Security bonus, spending some of that found money on a worthy charitable cause could—in addition to doing some good—put dollars back in your pocket around tax-time thanks to a deduction.


Spending is only listed last among these seemingly more virtuous options because of its relative alphabetical standing, not for lack of importance.  Indeed, spending is like fine wine, craft beer and single malt Scotch—overindulgence brings pain, but wise application is downright blissful.  Planned spending, some argue, lacks a certain exuberance that accompanies spontaneity—but not if you plan for spontaneity.  I recommend establishing a slot in your budget specifically designated for spontaneous expenditures for you and your family.  Then, in addition to the rush of impulsiveness, you can avoid the hangover of having to find a way to pay for it.

And remember, that time of year when many of us increase our spending on ourselves and others is fast approaching.  Your Social Security bonus is a great way to sock away money for gifts, Fraser Firs and holiday parties.

If you’re fortunate enough to have sufficient income to cross over the Social Security threshold, you have reason to be thankful.  Interestingly, some assume that the need for budgeting erodes as our income rises, but I do believe that “to whom much is given, much is expected,” and what better way to satisfy that maxim than knowing where your money is going.