What role does Social Security play in asset allocation: Retirement Scan
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What role does Social Security play in clients’ asset allocation decisions?
When Morningstar asked its readers how Social Security affects their asset allocation decisions, most said they think it should be treated more as an income stream than as an asset. While some people factor the present value of Social Security in determining their portfolio's asset allocations, more people look at it as longevity insurance or a reduction in future expenses. "The purpose of my retirement investments is to generate retirement income. Social Security generates inflation-adjusted retirement income and so I reduce anticipated retirement expenses (which are also inflation-adjusted) by anticipated Social Security income payments," says an investor. Others however, view it differently. For one, Vanguard founder Jack Bogle has said that people ought to consider Social Security as an asset (akin to a fixed-income allocation), and failing to account for it can result in potentially underweighting their equity allocation.
Older workers and the search for "good" jobs
While the unemployment rate for people aged 55 and above is 3.5%, many older workers are stuck in less financially rewarding jobs, according to an article on CBS Moneywatch, which cited a report from the Schwartz Center for Economic Policy Analysis. However, it is possible that seniors who opt to continue working accept jobs that pay lower than their pre-retirement jobs because these jobs are meaningful and fulfilling to them. A report from Merrill Lynch and Age Wave shows that financial need is not the top factor why seniors decide to remain in the labor force.
Social Security should give seniors better advice about when to start benefits
The Social Security Administration is taking "immediate action" to address the problems and inconsistencies in what its claims specialists are advising claimants as cited by the Government Accountability Office in a report, according to this article on Money. The report calls for the SSA to give guidance that will prompt claimants to view retirement benefits as a hedge against longevity risk. “What I like about this is that we’re finally seeing some awareness in the government that there’s an opportunity to help people get as much as they are entitled to receive from Social Security,” says a spokeswoman for the agency.
Why baby boomers may never get old
Seventy percent of non-retired people want to continue working during the golden years, according to an article on Fox Business, which cited a survey by Bankrate. “The baby boomers are now hitting their retirement stride, and their attitude is unlike that of previous generations. One boomer told me that it's easier to work at a second career or vocation when your friends are still working,” says a retirement analyst. The baby boomers don't see themselves as old, she said. They see retirement differently than their parents did. “When they were young, they felt they were changing the world – and they still want to do that.”