Reacting to today's release of the Trustees' report on the fate and future of Social Security, Dale Brown, president and CEO of the Financial Services Institute, had the following observations:
"Many years ago, this nation made a promise to its seniors – a promise that must be honored, not only for this generation, but for all who follow. Unfortunately, again today, we got a cold dose of reality into what it will take to keep our promise. While FSI understands and appreciates the critical benefits of Social Security, we also understand those benefits will undoubtedly diminish over time. Therefore, Americans must plan for retirement accordingly.
"That is why we recently announced that we are expanding our advocacy agenda to include retirement and tax issues both nationally and in the states. Specifically, we will be working towards: preserving the tax deferral on IRAs, 529 Plan Accounts, Health Savings Accounts and other tax advantaged accounts that promote planning to address common saving and investment needs; preserving the tax advantaged status of variable annuities; expanding opportunities and incentives for saving through the employer-provided retirement system; and reigning in government spending through entitlement program and tax code reform.
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"Today's report – coupled with an anemic 4 percent savings rate – does not bode well for the financial futures of hard-working Americans. This reiterates the fact that utilizing an independent financial advisor is the best way to ensure a secure retirement regardless of what happens with entitlements."
IRI president and CEO Cathy Weatherford echoed Brown's concerns, especially about what she notes as "entitlement risk."
"These reports underscore yet another retirement risk confronting future retirees – entitlement risk. IRI research shows that about nine out of ten Baby Boomers are expecting Social Security to be a source of income during retirement. Yet, given the long-term financial challenges facing Social Security and Medicare, there is tremendous uncertainty regarding what Americans can count on from these retirement programs.
"The only thing that is certain is that these programs require changes to keep them financially viable and that these changes may potentially reduce the cumulative amount of benefits that future retirees will receive from them. Regarding Social Security, older Boomers may be subject to a change in the measure of inflation that would affect cost of living adjustments. Younger Boomers and following generations could be subject to a number of possible changes including an increase in the retirement age, means testing and other potential modifications to the benefit formula.
"To ensure that they will have the same level of financial security during their retirement years, all consumers must develop a plan today that identifies alternative sources of lifetime income."
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