Author: John Reagan
The New York Times Sketch Guy, Columnist, and Take the Longview podcast guest Carl Richards, is one of the best in the world at connecting money and emotion. His unique ability is boiling down ideas to their essence so that everyone can relate. In a recent piece, he does it again, clearly outlining a 5-step guide to making it through the ups and downs of the financial market. Check it out here.
Imagine owning an asset that has increased by 25% during the recent coronavirus pandemic. Now let me tell you a little secret: you probably already own it! I’m talking about Social Security benefits.
At Hill Investment Group, we help clients with all kinds of important decisions to optimize their portfolios. One of these decisions is when to collect Social Security benefits. The question is much more complicated than you might think. Some clients have seen six-figure differences in options after we run our analysis. Timing when to collect on Social Security is even more important today with interest rates near zero. If you are curious about how we do this analysis and are interested in what the answer might be for you, schedule a call here.
Recently, New York Times financial columnist, Jeff Sommer, wrote a piece arguing we should think of our social security as an annuity. Sommer argues it’s an annuity we all own that has skyrocketed in value – to the tune of $1 million for some. As many of you know, we generally advise AGAINST owning annuities of any type and better explain why this is different.
The key points:
- Social Security can be compared to annuities because similar to an annuity, Social Security provides a monthly guaranteed income for a specified period of time.
- With low-interest rates, the income-producing power of other investments has dropped while the value of Social Security has held strong.
- Because of this, coupled with Social Security payments increasing with inflation, the effective value of the Social Security income stream has soared.
- As an added benefit over annuities, the US Government guarantees the payments, so it’s virtually risk-free, unlike a stock portfolio.
- If you tried to purchase an annuity on the market with similar features, it would be an expensive annuity indeed. Example: for a high-income earner who delays claiming Social Security benefits until age 70, Sommer suggests an annuity providing comparable benefits might cost about $1 million today, an increase in the cost of about 25% from prior years.
Be sure to check out his article here.
Do you ever feel the urge to make a big change? We understand the temptation and share a story from our experience to help you reframe the way to win. Please enjoy the audio version of our client letter entitled, “The Big Move” to help you hold tight.