“Do I really need disability insurance? I mean, I have a desk job, and as long as I have my mind, I can always do my work, right? Besides, wouldn’t my employer’s workers’ compensation insurance take care of my basic needs if something happened to me?”

Let’s take those questions one a time.

• “Do I really need disability insurance?”

If you are suddenly unable to work for medical reasons, and you are not (yet) independently wealthy, you need disability insurance to provide income. The bills don’t stop just because you can’t work. And you’ll likely have extra medical bills too.

Did you know the Kaiser Family Foundation found that in 2015 medical bills were the reason a million adults declared bankruptcy?

So, yes to the first question.

• “As long as I have my mind, I can always work, right?”

I’ve heard this line for years. It’s always said by someone who has never been severely ill or injured.

If that’s you, thank God for your good fortune. But to help you get in touch with how being disabled might affect your mind, try this thought experiment: Imagine what would happen to your ability to focus if you took a sledgehammer and gave your index finger a good, hard whack? Or do this: Set your alarm clock for 2 a.m. three days in a row. Then, on minimal sleep, try to solve a really tough work problem.

Pain and fatigue have a way of short-circuiting our best cognitive skills. So, no to the “as long as I have my mind, I can always work” statement. If you are physically disabled, that may be the case, but it is by no means a certainty.

Many think of being disabled as “suffering a freak accident that results in paralysis.” That’s the exception, not the rule.

According to the Council for Disability Awareness, the majority of long-term disabilities are due to common illnesses like cancer, heart attack, or diabetes. Back pain, injuries, and arthritis are also significant causes. This is the stuff of long-term, persistent pain and/or fatigue.

And get this: Statistics tell us that one in five workers—before the age of 65—will miss work for at least a year due to a disability.

• “Wouldn’t my employer’s workers’ compensation insurance take care of me if I were injured?”

About 90% of disabilities are not work-related. Therefore, they are not covered by workers’ compensation. Only a disability caused by or related to your work will be covered by workers’ comp. Just because you “work somewhere” doesn’t mean workers comp will cover you.

Social Security might pay something in the event of your disability. However, according to USA Facts, only 38% of those filing for SSDI benefits are accepted. And only half of those rejected applicants win their appeals.

And even if you do meet the qualifications, the average monthly benefit paid by Social Security is $1,358 a month. You likely need more than that.

Insurance is all about transferring risk away from you by accepting a small loss (the premium) to avoid the potential for a disastrously large loss (the loss of your income for life). When it comes to your ability to earn an income, that’s a great trade to make.

So, yes. The bottom line is you need disability income insurance. Be a careful shopper.

Talk to a qualified agent. Ask a lot of questions. 

And to make sure you’re asking ALL the other right questions, email me at bmoore@argentadvisors.com. I’ll send you my free list of “30-Something Questions for People Who are 60-Something.”

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

One of my clients lives abroad. I only see him about once a year. At our last visit, I was shocked at how much he’d trimmed down. “You’re not half the man you used to be!” I quipped.

I suspect that’s where we’re headed with Social Security and Medicare—a sizable reduction in benefits. If so, very few will be pleased.

Back in their 2009 annual report, the Social Security and Medicare Trustees warned us, Medicare would run out of “trust fund assets” in 2017. Clearly, that didn’t happen. 

Now they tell us that Social Security can pay in full retirement income benefits until 2034. Medicare should be okay until 2028 (remember, it was going to run out in 2017…). 

Years ago, Nobel Prize-winning economist Milton Friedman diagnosed the problem with these programs when he listed the four ways we spend money. (Friedman wasn’t referring to these two programs, but I think you’ll see the connection.) 

1. Spend your own money on yourself. 

When you do this, you are both thrifty (it’s your money, remember?) and value-conscious (you want your money’s worth). When spending your own money on yourself, you are motivated to be very careful about how and how much you spend. 

2. Spend your own money on someone else. 

This is gift-giving or charity. When using your own money on behalf of others, you are incentivized to be thrifty. Even if you give extravagantly, you want good value from that large expenditure. Who wants to spend their hard-earned money on a sub-standard gift?

3. Spend someone else’s money on yourself. 

Think about business trips vs. vacations. Most business travelers tend to splurge on meals and rooms when spending company money. (That’s why the travel industry loves business travelers.) Yet even though you’re spending someone else’s money, you insist on quality. You spend more, but you also demand more. Your focus is not on what you spend, but on what you are getting.

4. Spend someone else’s money on someone else. 

Here the incentives for wise economic behavior have all but been removed. You are spending someone else’s money, so where’s the incentive to be thrifty? And you are spending it on someone else, therefore your concern for quality is reduced, if not gone. 

This fourth option is the inevitable result of most government spending. That’s not to say some government spending isn’t needed…or carried out wisely. I’m simply speaking to natural human tendencies, which affect any such program. 

Back to Social Security and Medicare—and the question of what their futures look like…I don’t expect massive government SOPMOOP (“spend-other-peoples’-money-on-other-people”) programs to voluntarily get their fiscal act together. 

It will likely take an external crisis. Maybe the rest of the free world will decide the U.S. is no longer the safest place for their savings dollars, due to our out-of-control unfunded promises.  

Should that happen, interest rates would rise to attract the money back. That means our cost of borrowing would rise, and our SOPMOOP problem would get even worse.

So, do I think Social Security and Medicare will be there for you? I do. These programs are deeply entrenched in our culture and politics. Eliminating them would be nearly impossible.

But look for them to be smaller…maybe half the SOPMOOP they are today.

You probably have other financial questions you wonder about. Make sure you’re asking all the important ones. Email me at bmoore@argentadvisors.com and I’ll send you my free list of “30-Something Questions for People Who are 60-Something.”

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

So often I get nine of the ten things I was supposed to buy, but there’s always that one item I don’t remember until I get home.

“Seriously? You forgot the tomatoes? How am I supposed to make spaghetti sauce without tomatoes?” (Helpful tip: That is a rhetorical question.) 

Forgetting something at the grocery store is annoying. But forgetting a “key ingredient” to your retirement can be devastating.

That’s why I recommend using a checklist. 

Checklists are great. Pilots use them. So do astronauts. Hospitals use them to improve surgical safety. And successful franchises – once they have a winning formula – use a checklist of sorts to ensure that customers have the same experience at each new location. 

A checklist reminds you of what you need, or what you need to do.

For pre-retirees (usually folks in their 60s), a checklist is invaluable for making sure you’ve taken care of all the important stuff ahead of time.

For example, such a checklist would include questions like these:

Career transition 
How much longer do you plan to work?
Do you plan to work any after retirement?

Retirement lifestyle
What are you most looking forward to in retirement?
Have you discussed this with your spouse?

Housing in retirement
Will you stay in your present home? How long?
Any plans for a second home or cabin?

Retirement income 
How much income will you want or need?
Where will that income come from?
What are the chances of you outliving that income?

Social Security
Do you have a retirement income projection from www.ssa.gov?
Do you know when you will begin taking Social Security?
Do you know how your Social Security will be taxed?

Healthcare
Will you retire before you are eligible for Medicare?
Do you know when to sign up for Medicare?

Estate Planning
Do you and your spouse have valid, current wills?
Does your family know where they are?

Legacy planning 
How do you want to be remembered by those you love?
Have you considered writing your own obituary, then living in such a way that it becomes true?

Those are just a few of the questions you need to be thinking about. In fact, I just compiled a “Checklist for Sixty-Somethings” that has more “items” than I can include in one short column. I’d be glad to send it to you for free if you request a copy from me at bmoore@argentadvisors.com. 

If you forget a grocery item, the result is a mildly frustrating trip back to the store.

But forget something critical in your pre-retirement preparation, and isn’t like you can go back. At that point, the “store” will be closed.

Don’t forget. Use a checklist.

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

Over the years, I’ve had one or two (hundred) folks say something like that to me. 

Recently I got so curious, I decided to run the numbers. On myself.

(By the way, did you know you can go to the Social Security website, www.ssa.org, create an account, see your payment history, and get an estimate of the Social Security benefits you can expect at retirement? It’s free. I highly recommend you do it.)

Here’s what I discovered.

In my first part-time job, I earned $1100—and paid $72 in Social Security payroll taxes. Not bad for a high school kid folding socks in the men’s department! 

In my first year of full-time employment, I earned a whopping $22,000. About $1300 of that went to Social Security—which is serious money when you’re only earning $22,000! 

The SSA website told me that in my entire work career, through 2020, I’ve paid $186,000 into the system. 

Meaning: If I retired today, I’d get $2300 per month. And if I’ll agree to wait until age 66 (and 10 months), Social Security will pay me $3200 per month. 

My wife says she still likes me, but not enough for me to be hanging around the house all day. So, I’ll likely work to age 70. By waiting till then, Social Security says they’ll pay me $4100 per month.

But wait! There’s more! All the above numbers are increased by 50% because Social Security also promises to pay my wife a spousal benefit. 

The first thing I observe is how quickly I can recoup the $186,000 I paid into the system over 40+ years. If I retired today, I’d get my money back in less than five years. If wait until age 70, I’ll get all my money back in only about two and a half years! 

It’s tempting to think, “If only I could have kept all that money through the years and invested it myself. Why, I’d be like Warren Buffett!” 

But I know myself—and a little something about human nature. I didn’t have the life experience that I do now. It’s a sure bet I would NOT have been a disciplined investor all those years (which is probably why the Warren Buffetts of the world are so few and far between).

And that’s why Social Security is a good thing.

Social Security provides a baseline of household income for the majority of American retirees. Many live on Social Security and whatever minimum amount they are required to take from their retirement plans. They’re not rich. But they’re not destitute either. 

To be sure, for things to keep working like this, changes will need to be made to Social Security’s funding formula. According to current estimates, Social Security has only enough money to pay benefits in full until 2034. At that time, there will only be enough funding to cover 78 percent of promised benefits. 

My guess is that those changes will be made at the last minute. To paraphrase Winston Churchill, Congress will eventually do the right thing…after they have tried everything else. 

In the meantime, you and I need to be getting the other aspects of our financial lives in order. That way we can add to the baseline of household income Social Security provides.

A great way to get started is by reading my new e-book “How to Put Money Worries in Your Rear View Mirror.” It’s for anyone who feels lost when getting ready for retirement. This e-book/financial roadmap is free to anyone who emails me at bmoore@argentadvisors.com.

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

Here’s an eight-step plan for figuring that out.

1. Start with your current income. As an example, let’s assume you make $100,000 annually.

2. Assume some inflation. No one knows what inflation rates will be between now and your retirement. What we do know is that postage stamps cost 55 cents today. Twenty years ago they cost 34 cents. Thirty-three years ago they cost a quarter. Might be wise to assume many of your costs could double over a 30-year retirement.

3. Estimate your taxes. Many people will have a lower tax bill in retirement for three reasons.

First, the steepest tax most workers pay is their payroll tax. Currently, wage earners pay 7.65% of the first $142,800 of their income in payroll taxes. In our example above, that means $7,650 of taxes that would disappear in retirement. 

Second, most retirees receive Social Security income, and only a portion of that income is taxable. Depending on how much income you receive from various sources, anywhere from zero to 85% of your Social Security income may be taxable. 

Read that carefully. It doesn’t mean you’ll pay 85% of your Social Security income in taxes! It means that up to 85% of the income itself maybe counted for tax purposes. So if you got $1,000 of Social Security income and 85% of it qualified as taxable income, you would count $850 as taxable income (along with all your other income). 

Finally, the fact that your overall income is lower would put you in a lower overall income tax situation.

4. Don’t count money you now save. You don’t live on the money you now save. You are saving that for the future. It isn’t part of the current lifestyle you are seeking to replace in the future. 

5. Build in some “fudge factor.” Let’s be honest, this is art, not science. Will unexpected things come up in your retirement years? If you said “no,” you get an “F” in history. Stuff always comes up. And it will in the future. So let’s have a little extra income handy plus a little extra liquidity (i.e., readily available savings) beyond our calculated needs. 

6. Remember Social Security. A person making $100,000 might expect about $30,000 per year in Social Security benefits, depending on when they begin receiving benefits. A spouse might receive anywhere from half to equal that amount. Let’s conservatively assume total household income in retirement from Social Security is $40,000 in this example. 

7. Estimate an income stream. How much income can you expect from all the assets you’ve saved for retirement? If you want to live off bank interest rates, it won’t be much. And if you just withdraw what you feel you need month to month, you may run out of money. Besides, investment accounts are subject to market fluctuations, which can be fatal to a withdrawal plan. 

As you can see, this is the tricky part of retirement planning. It’s where most people can benefit from the help of an experienced financial planner.

8. Put it all together. Back to our example of a household earning $100,000. From that number we can subtract payroll taxes ($7,650) and savings ($10,000). The house will be paid off, so that $1,000 a month mortgage payment is eliminated. That puts us down to $70,350.

To account for increases in the cost of living, we may need to bump up that $70,000 to $100,000. With the $40,000 our couple will be receiving from Social Security, that leaves $60,000 that needs to be produced in annual income from our retirement savings. 

Could your retirement savings reliably produce $60,000 in retirement income each and every year? 

If you don’t know, you probably should. And a great place to start is by reading my new e-book “How to Put Money Worries in Your Rear View Mirror – The Financial Freedom Roadmap.” It’s free to anyone requesting it. Just email me to request (bmoore@argentadvisors.com).

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

I collect Social Security statements. Mine.

Yes, I am that boring. 

The oldest one I’ve got dates back to 2003, so I’ve got almost 20 years’ worth of Social Security (SSA) statements. But they contain my work records all the way back to the late seventies.

A lot has changed in my life and in Social Security over the four decades since I joined the work force. Here are just some of the things I’ve noticed by reviewing my Social Security Statements through the years.  

It pays to show up and grow up. The “Your Earnings Record at a Glance” section in my 2003 SSA statement tells me I first earned a taxable wage the same year I graduated from high school – 1977. I worked in the men’s department of a clothing store in the spring, then in a factory stacking sheet metal that summer. I made $1,175 for my part time efforts that year. 

My first year of full-time employment was 1983. By the time 2003 rolled around, my income had risen significantly. About ten times higher than the (very meager) income I earned my first year of full-time work. 

I find that many young people don’t realize how much their income will rise from their mid-20s through their mid-40s. It’s not guaranteed, but as you grow in the economic value you can bring to an employer, it’s not unusual to see that economic value rewarded through higher and higher incomes. 

Sometimes waiting is good. My 2003 SSA statement gave me an estimation of my benefits at “full retirement age,” which in my case is 66 years and 10 months. By the time 2020 rolled around, that projected benefit was 50% higher. Most of that increase was due to Social Security’s practice of increasing benefits by a cost of living factor.

And, the statement informed me, if I wait until age 70 to start collecting Social Security my benefit will be 26% higher still. 

This must be expensive. It is. One way to create guaranteed monthly income for yourself, similar to Social Security, is to purchase an immediate annuity. If you want an income of $2,000 per month and you want that income to increase with inflation, you will need to pay about $525,000 (based on current rates) to an insurance company.

But Social Security isn’t an annuity is it? It is a transfer tax. The 6.2% of income we pay as a tax, together with the matching 6.2% our employers pay, goes directly to someone who is already retired to pay for their Social Security benefit payments. 

Where have the warnings gone? My 2003 SSA statement contained this warning: “Changes will need to be made…in about 30 years, there will be nearly twice as many older Americans as there are today…in 2017, we’ll begin paying more in benefit than we collect in taxes…by 2041, the trust fund will be exhausted and the payroll taxes collected will be enough to pay only 73% of benefits owed.”

My 2010 SSA statement told me the date by which the SSA trust fund would be exhausted was 2037. 

My 2014 SSA statement told me that the trust fund exhaustion date was 2033.

By 2015, all the warnings were gone. They just took that section out. And it has not returned. 

I had to consult the annual report of the Social Security Trustees to get an update. They say the SSA will, “be able to pay scheduled benefits on a timely basis until 2034… At that time, the fund’s reserves will become depleted and continuing tax income will be sufficient to pay 76 percent of scheduled benefits.”

Sounds like Social Security is less secure than most people image. Either taxes will have to go up, or benefits will have to come down. Or both.

Either way, it’s a good idea to keep an eye on your Social Security benefits.

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

She was nearly 65 and had a six-figure mortgage attached to her house. She was single and had a good income as a nurse.

But as she looked ahead, she could see trouble coming. 

“I make nearly $5,000 per month now, and I’m hoping to work to age 70. I’m getting around $2,000 per month from Social Security when I turn 66. My house note is about $1,000 per month now, so I was trying to think of ways to get it lower,” she explained.

It made perfect sense to her…she could foresee the day when her $5,000 per month income would suddenly plummet to $2,000. If she still had a $1,000 per month house note to pay, she would barely have enough to scrap by on. 

“So, let’s say you do refinance your house and your house note goes from $1,000 per month to $500. Once you’re fully retired, you would have your $2,000 income and $500 of it would go to a house note…until you’re 95. How does that feel to you?”

“Well not too good, but I don’t know what else to do!” she shot back. 

I thought about it for a moment and suggested, “What if we could reduce your income from $5,000 to $4,000 now, but then at your retirement,  your income would be $2,600 and you wouldn’t have a house note at all. You would own it free and clear?”

Her eyes got wide and she said, “Oh my goodness. That would be almost twice as much money to spend! Do you have some investment that can do that for me?”

“Absolutely not,” I answered. “But you do.”

She was puzzled.

“Your mortgage,” I said. 

“You’ve got five years left to work,” I explained. “During that time, you’ll keep earning $5,000 per month. You pay $1,000 a month towards your mortgage, so that leaves you $4,000 to pay for everything else. That’s your current situation.

“If you’ll commit an additional $1,000 per month for the next five years to paying down your mortgage, you can have it paid off by the time you retire,” I explained. “So, you’ll be paying your regular mortgage payment of $1,000, PLUS an additional payment of $1,000. That’s $2,000. Do that, and you can pay off your house by the time you retire.”

“And then when I retire?” she asked.

“Well, by that time, your Social Security would have increased in value from $2,000 to $2,600 per month (estimated). That’s because every year you wait to take your Social Security benefit, it increases by 8%. So, by waiting to age 70 to take your Social Security, you get a higher guaranteed income for the rest of your life.”

Another way to summarize this strategy was to realize that if she would limit her non-mortgage lifestyle to $3,000 per month now (because the other $2,000 per month would be going to pay down her mortgage), she could lock in a $2,600 guaranteed income (with no mortgage) for the rest of her life in retirement. 

In her case, the best way to handle debt in retirement was to retire the debt.

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

I mean the kind of employer that promises to send you millions of dollars over the course of your retirement. Guaranteed.

You might be closer than you think.

When it comes to retirement, attitudes naturally change as we get older.

Twenties – time to spare. When a person turns twenty, she’s still got twice as long as she has been on the planet before she reaches traditional retirement age. Her whole life is in front of her. She generally lacks any sense of urgency to prepare for retirement, because so much will come before that. 

Thirties – pulling out my hair. The thirty-year-old person is busy. Busy getting established in the early productive years of their career. The thirties are often a decade of family formation, having children and acquiring mortgages and car notes. It’s work all day, pick up from daycare, homework, baseball and too many drive-through meals. I’ll think about retirement later. I’m too busy to think about now.

Forties – debt despair. A whole fist full of reality hits at age 40, not the least of which is how much debt you have and how long you’ll have it. You are realizing that if you keep paying thirty or forty cents on every dollar you earn to pay debt, you’ll never get anywhere. It can lead to despair. 

Fifties – I’m not prepared! There’s no denying at fifty that you’re past mid-career and likely past mid-life. If you never thought about retirement before, it may be all you think about now. It’s coming like a freight train and you can’t find your way off the tracks. 

Yet the fifties is often the highest-earning decade of one’s professional life. The kids may have moved out and (at least somewhat) off the payroll. So there is often available cash flow to save for retirement, but often not much of a plan.

Sixties – I want my fair share! Americans who gave little thought to government programs and benefits develop a sudden interest once they turn 60. They probably do not have a company pension and the balance in their 401K looks less impressive all the time. 

Social Security, something they never thought they would ever live to collect, starts looking pretty attractive. Especially once they start paying attention to the Social Security benefit statement the government sends them. 

Take the case of George and Martha. George worked in sales, making about $75,000 per year. Martha worked as a bookkeeper earning $50,000. When they turned 60 they started focusing on their annual Social Security benefit statements. George thinks he’ll work until his age 70, but Martha plans to retire at 67. 

With the help of a Social Security benefits calculator, they discovered that if they each live to life expectancy, the Social Security payments would receive together would exceed $1,000,000 over their lifetimes (assuming an average 2% cost of living increase each year). 

Social Security is a government program and as such is pretty complicated to understand. Today our government spends about 25% of the entire federal budget on paying Social Security benefits. It’s a massive government program and it’s not going away anytime soon. 

Some political unpopular financial adjustments are going to have to be made sometime, but I consider there to be zero percent chance it “won’t be there.” It will. 

As you close in on your own retirement date, it would be a good idea to review your own Social Security benefit statement. You can create an account and access your personalized report at www.ssa.gov. 

It might be taking things a little too far to call Social Security a “lucrative perk.” 

But for most Americans, it remains the foundation of a secure retirement.

Argent Advisors, Inc. is an SEC registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information at https://ruston.argentadvisors.com/important-disclosure-information