Potential social security changes this year could directly impact your self-directed IRA investing strategy. The federal government is trying to resolve the nation’s financial issues, and it appears that social security changes are up for discussion. So, what potential changes loom for social security, and how can you prepare?
Reduced monthly benefits. One of the possible social security changes is to reduce the amount of benefits that are paid to retirees each month. While this might be the most politically difficult path to reduce the program’s total costs, it’s arguably the most direct approach.
If this type of benefits reduction comes to pass, you may need to ensure that your self-directed IRA provides for an adequate amount of replacement income. You may consider accumulating interest-bearing investments over time; and, if you can anticipate your retirement date, you can modify your investment choices as you approach that date.
Smaller cost of living increases. Another proposed social security change relates to annual cost of living adjustments. Currently, the program includes provisions for cost of living adjustments so that a retiree’s Social Security income does not reduce (in real terms) over time because of inflation’s effects. These cost of living adjustments are currently based on a particular inflationary index (the Consumer Price Index for Urban Wage Earners and Clerical Workers, as determined by the Bureau of Labor Statistics of the Department of Labor).
Depending on whether and how the cost of living adjustment process changes, you may need to adjust your self-directed IRA portfolio to ensure that you’ll be able to make up any income shortfalls that will become more pronounced the further you get into retirement.
Older eligibility thresholds. Another option is to change the ages that people become eligible for certain Social Security retirement benefits. For example, for people born in 1967 or later, the full retirement age is currently 67. An individual can also choose to retire at 62, but doing so will result in a reduced benefit. Furthermore, an individual can choose to delay his or her retirement until age 70 and receive an increased monthly payment for the remainder of his or her lifw. The Social Security program’s total costs could be greatly reduced by increasing any of these age thresholds.
If these age triggers are raised, you’ll need to make sure that your self-directed IRA is funded well enough to pay for your retirement expenses until your Social Security benefits kick in.
Limit benefits availability. Finally, it’s also possible that the program could change to implement a lifetime cap on benefits or to provide means-based testing, which means that wealthier individuals may not qualify for full benefits. If these types of social security changes occur, you may need to be more aggressive in the investment choices within your self-directed IRA because your IRA will need to provide a greater portion of your retirement financial support.
Any social security changes are certain to affect the investment choices you make in your self-directed IRA. Contact Quest Trust Company to stay advised of how these changes might impact your account.
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