Broker Check

November Newsletter

November 1, 2019

“…Will I Outlive Social Security and Medicare?”

It is no secret that this country’s Social Security program, as it is structured now, is in danger of running out of money. The latest estimates are that the Old-Age and Survivors Insurance and Disability Insurance Trust Funds are expected to be depleted by 2035, according to the 2019 Social Security Board of Trustees report to Congress.  This may be concerning for those who have not planned for the possibility of life in retirement with reduced social security benefits. The trustees recommend that lawmakers address the projected trust fund shortfalls in a timely manner in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust.  Each year the projection of funds in these Trust Funds changes and the prospect of the funds being exhausted by 2035 is unsettling.  After that year, benefits are scheduled to be reduced by twenty percent. 

Considering the concerns we have about the long-term feasibility of Social Security we encourage individual investors to continue accumulating, investing and planning independently of this resource to ensure more control over their retirement picture. 

A few tips to keep you on course to that enjoyable retirement; save first, spend second and have a working budget strategy so you can enjoy what you have available.  Focus on tax deferred accounts when saving for retirement, including Roth IRA contributions.  Lastly, consider the pros and cons of the timing when claiming social security benefits, including working beyond the normal retirement date.  Many of us are already planning on working into our seventies.  Remember we are here to help you evaluate your options.

In the fourth quarter of each year we encourage clients to once again give some thought to how your income tax liabilities will be impacted by decisions you make before the end of the year. Please contact us and your tax professionals to discuss any of the following:

  • If you have not already done so, please consider making contributions to the tax-advantaged accounts available to you. Give thought to fully funding your Health Savings Accounts (HSAs).
  • If you have a Traditional IRA, it may make sense to convert a portion to a Roth IRA before the end of the year. Yes, you must pay income tax to complete this, but the future benefits can far outweigh the short-term cost.
  • If you participate in a company retirement plan (Simple Plan, 401k or other qualified plan) that provides a matching contribution, you should, at a minimum, contribute enough to the plan to get the maximum allowed company matching of funds. Contributions from your income will be tax deferred.
  • If you have accumulated any 2019 capital gains in your taxable accounts (including estimated capital gains dividends) you may want us to “harvest” some year-end tax losses; please talk this over with your tax advisor and then call us. Keep in mind that all dividends and capital gains are tax-advantaged over ordinary income. If you want us to provide you or your tax advisor with year-to-date income and capital gains information for your taxable accounts, please contact us.

To help your money last in retirement, it is important to be informed and disciplined about your withdrawal strategy; understand the importance of taking distributions from your investment accounts in the proper sequence to better utilize assets.  By managing this correctly, we can add years to your retirement distributions.  Understand that inflation effects retirees significantly more now than previous generations because people are living longer. Therefore, in the first years of your retirement, we protect against inflation by staying partially invested in equity markets to continue the growth of your portfolio. Our sound intelligent investment strategy emphasizes the significance of dividends and interest allowing for greater cash flow in retirement than a portfolio based solely on market appreciation. 

Last month, the brokerage industry announced the beginning of zero commissions for closed-end funds and other exchange-listed securities. TD Ameritrade Institutional has eliminated the $7 trading cost. You might ask, “How does TD Ameritrade Institutional make money?”  TD Ameritrade Institutional isn’t giving up much revenue by offering customers “free” trades.  The money to be made for them in stock trading comes from the “float” on the customer cash which sits in accounts.  As active portfolio managers, we keep our clients invested in their model portfolio, with the remaining minimal cash balances placed in interest bearing money market accounts. 

All of us at Intelligent Investment Management wish you a safe and peaceful holiday season beginning with the upcoming Thanksgiving holiday.  We hope it is a holiday filled with fun, friends and family!  Please don’t hesitate to call or send us an email if you have questions or concerns about your portfolio in addition to any financial planning questions you may have at this time of year.



Intelligent Investment Management, LLP