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9 Facts About Social Security

Social Security has been a fact of retirement life ever since it was established in 1935. We all think we know how it works, but how much do you really know? Here are nine things that might surprise you.

  1. The Social Security trust fund is huge. At $2.9 trillion at the end of 2018, it exceeds the gross domestic product (GDP) of every economy in the world except the ten largest: China, the European Union, the United States, India, Japan, Germany, Russia, Indonesia, Brazil, and The United Kingdom.1
  2. Most workers are eligible for Social Security benefits, but not all. For example, until 1984, federal government employees were part of the Civil Service Retirement System and were not covered by Social Security.2
  3. You don’t have to work long to be eligible. If you were born in 1929 or later, you need to work for 10 or more years to be eligible for benefits.3
  4. Benefits are based on an individual’s average earnings during a lifetime of work under the Social Security system. The calculation is based on the 35 highest years of earnings. If an individual has years of low earnings or no earnings, Social Security may count those years to bring the total years to 35.4
  5. There has not always been cost-of-living adjustments (COLA) in Social Security benefits. Before 1975, increasing benefits required an act of Congress; now increases happen automatically, based on the Consumer Price Index. There was a COLA increase of 2.9% in 2019, but there was only an increase of 2% in 2018.5
  6. Social Security is a major source of retirement income for 67% of current retirees.6
  7. Social Security benefits are subject to federal income taxes — but it was not always that way. In 1983, Amendments to the Social Security Act made benefits taxable, starting with the 1984 tax year.7
  8. Social Security recipients received a single lump-sum payment from 1937 until 1940. One-time payments were considered “payback” to those people who contributed to the program. Social Security administrators believed these people would not participate long enough to be vested for monthly benefits.8
  9. In January 1937, Earnest Ackerman became the first person in the U.S. to receive a Social Security benefit—a lump sum of 17 cents.9

To learn more about CapSouth and the services we provide, contact our office at 800.929.1001 or visit our website at www.capsouthwm.com

CapSouth Wealth Management – Dothan, AL, McDonough, GA, Charlotte, NC

1. Social Security Administration, 2018; CIA World Factbook, 2018
2-5, 7-9. Social Security Administration, 2019
6. Employee Benefit Research Institute, 2018

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with CapSouth Wealth Management. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Copyright 2020 FMG Suite.

CapSouth Partners, Inc., dba CapSouth Wealth Management, is an independent Registered Investment Advisory firm. CapSouth does not offer tax, accounting or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences.

9 Facts About Retirement

9 Facts about RETIREMENT

Retirement can have many meanings. For some, it will be a time to travel and spend time with family members. For others, it will be a time to start a new business or begin a charitable endeavor. Regardless of what approach you intend to take, here are nine things about retirement that might surprise you.

  1. Many consider the standard retirement age to be 65. One of the key influencers in arriving at that age was Germany, which initially set its retirement age at 70 then lowered it to age 65.1
  2. Every day between now and the end of the next decade, another 10,000 baby boomers is expected to turn 65. That’s roughly one person every 8 seconds.2
  3. In 2018, people aged 65 and older accounted for 15% of the population in the U.S. By 2060, they are expected to represent more than one in four Americans.3
  4. Ernest Ackerman was the first person to receive a Social Security benefit. In March 1937, the Cleveland streetcar motorman received a one-time, lump-sum payment of 17¢. Ackerman worked one day under Social Security. He earned $5 for the day and paid a nickel in payroll taxes. His lump-sum payout was equal to 3.5% of his wages.1
  5. Sixty-seven percent of retirees say they are confident about having enough money to live comfortably throughout their retirement years.4
  6. People aged 65 and older account for 34% of all prescription medication use and 30% of all over-the-counter medication use. Nearly nine of 10 adults aged 65 years and older say they have taken at least one prescription drug in the last 30 days.5,6
  7. Fifty-nine percent of retirees were dependent upon on Social Security as a major source of their income. The average monthly Social Security benefit at the beginning of 2019 was $1,461.1,4
  8. Centenarians – in 1980 there were 32,000 of them. Today there are more than 86,248 And 79% of them are women.7
  9. Seniors age 65 and over spend a lot of time watching TV, on average, over 4 hours a day.8

Conclusion

These stats and trends point to one conclusion: The 65-and-older age group is expected to become larger and have more influence in the future. Have you made arrangements for health care? Are you comfortable with your investment decisions? If you are unsure about your decisions, maybe it’s time to develop a solid strategy for the future.

To learn more about CapSouth and the services we provide, contact our office at 800.929.1001 or visit our website at www.capsouthwm.com

CapSouth Wealth Management – Dothan, AL, McDonough, Ga, Charlotte, NC

1. The United States Social Security Administration, 2019
2. Forbes, 2018
3. The United States Census Bureau, 2018
4. Employee Benefit Research Institute, 2019 Retirement Confidence Survey
5. Medscape, 2019
6. UptoDate.com, 2019
7. The United States Census Bureau, 2018
8. U.S. Bureau of Labor Statistics, 2018

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with CapSouth Wealth Management. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Copyright 2019 FMG Suite.

CapSouth Partners, Inc., dba CapSouth Wealth Management, is an independent Registered Investment Advisory firm. CapSouth does not offer tax, accounting or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences.

Is Paying Off a Low-Interest Mortgage a Good Idea?

For many families, a home loan constitutes a significant portion of their household debt. As a result, some people choose to reduce this debt as much as possible before entering retirement. In fact, nearly one in three retirees have mortgage debt, and 17% of those paying off debt say that their mortgage is a top financial priority.[1]

But not all debt is equal. Interest rates have been historically low in recent years, so depending on your rate, your mortgage may be the cheapest form of debt you hold.[2] As such, using your extra money in different ways could make sense. Because everyone’s financial situation is different, many factors can affect choosing whether to pay off your mortgage.

As you assess your own mortgage, here are 5 common questions to consider:

1. Have you maxed out contributions to tax-advantaged accounts?

Preparing to have the income you need in retirement is important – yet, only 46% of retirees believe they have enough money.[3] If you and your financial representative feel comfortable with your retirement savings, you may be able to devote income to extra mortgage payments. However, the final years before retirement are your last opportunity to boost your contributions. If you still have room to save, you may want to bypass paying off your mortgage and put those additional funds into tax-advantaged accounts.

2. Will paying down the mortgage affect your taxes?

If you itemize your taxes, then your mortgage interest payments may be deductible. Once you stop making mortgage payments, you can no longer deduct that interest. Further, choosing to pay off your mortgage, either before or after you retire, also brings a different set of tax strategies to consider. If you can still benefit from deducting interest on your taxes, then you may want to continue doing so. Keep in mind that it’s important to view your financial situation from a complete perspective before making any tax decisions.[4]

3. Do you have adequate cash reserves?

Emergency savings are critical for an effective, long-term financial strategy. Unexpected life events, like unemployment, a sudden illness, or home repair, can strain household finances. To adequately prepare, you should aim to have at least 3 to 6 months of cash reserves on hand.[5] By doing so, you’ll be better able to cover major expenses without having to liquidate investments or go into debt. If you do not already have an emergency reserve – or need to set aside more money – consider boosting your savings before paying down your mortgage.

4. Do you have other debt?

People in the U.S. are carrying lots of debt, which can threaten their financial strategy. In fact, the average person with debt holds at least $38,000 (excluding mortgages), and 45% of retirees carry non-mortgage debt.[6] If you find yourself in a similar financial situation, you may want to put extra money toward other debt. Further, if any of those liabilities have interest rates higher than your mortgage, then you’ll keep more money in the long run by paying down that debt today.

5. Will paying off your mortgage bring happiness?

Most financial decisions have emotional components, which is why understanding your long-term goals is important when making a strategy. For some people, knowing that they own their home, free and clear, outweighs other financial considerations. If being able to pay off your mortgage early aligns with your financial goals, it may be the best decision for you.

The Takeaway

Choosing to pay off a mortgage requires carefully looking at your financial life and prioritizing which strategies make sense. With careful attention to your unique needs, you can make sound decisions that support your long-term goals. If you have any questions or would like to discuss this topic further, contact a CapSouth advisor at 800.929.1001 or visit our website at www.capsouthwm.com  

Footnotes, disclosures, and sources:

As part of the 2017 Tax Cuts and Jobs Act, mortgage interest deductibility is limited to mortgages up to $750,000 in principal value.

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

CapSouth Partners, Inc., dba CapSouth Wealth Management, is an independent Registered Investment Advisory firm. CapSouth does not offer tax, accounting or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences.

[1] https://www.transamericacenter.org/docs/default-source/retirees-survey/tcrs2018_sr_retirees_survey_financially_faring.pdf

[2] https://www.thebalance.com/fed-funds-rate-history-highs-lows-3306135

[3] https://www.transamericacenter.org/docs/default-source/retirees-survey/tcrs2018_sr_retirees_survey_financially_faring.pdf

[4] https://www.thebalance.com/mortgage-interest-deduction-before-and-after-retirement-2388985

[5] https://www.investopedia.com/terms/c/cash-reserves.asp

[6] https://news.northwesternmutual.com/planning-and-progress-2018

https://www.transamericacenter.org/docs/default-source/retirees-survey/tcrs2018_sr_retirees_survey_financially_faring.pdf

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