Social Security Funds Gain Additional Year in Forecasting

A strong job market and wage growth helps extend forecast for both funds when compared to last year.

A strong job market has helped buy the Social Security Trust Funds another year, according to the annual report from the Social Security Board of Trustees report released Monday.

The combined asset reserves of the Old-Age and Survivors Insurance and Disability Insurance Trust Funds are forecast to have enough revenue to pay all benefits and associated administrative costs until 2035, one year more than projected last year.

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Without Congressional action, the funds are projected to be depleted in 2035, with income sufficient to cover 83 percent of scheduled benefits, according to the board of trustees’ report.

The news of strengthened funding in part on the robust job market and wage growth comes as the Federal Reserve considers whether these relatively strong indicators, in addition to persistently strong inflation, should keep it from planned interest rate cuts this year. Decisions around Social Security have also been the subject of campaigning ahead of the November elections, with outcomes for the presidency and Congress potentially having an impact on the benefit.

According to this year’s report, the combined trust funds dropped by $41 billion in 2023 to a total of $2.788 trillion. Meanwhile, the total annual cost of the program is projected to exceed total annual income in 2024 and remain higher going forward; total costs began to be higher than total income in 2021.

“Congress can and should take action to extend the financial health of the Trust Fund into the foreseeable future, just as it did in the past on a bipartisan basis,” Martin O’Malley, Commissioner of Social Security, said in a statement. “Eliminating the shortfall will bring peace of mind to Social Security’s 70 million-plus beneficiaries, the 180 million workers and their families who contribute to Social Security, and the entire nation.”

Social Security paid total benefits of $1.379 trillion in 2023 to about 67 million beneficiaries, with total expenditures of $1.392 trillion. Meanwhile, an estimated 183 million people had earnings covered by Social Security and paid payroll taxes, leading to total income, including interest, of $1.351 trillion in the year.

The combined trust fund asset reserves earned interest at an effective annual rate of 2.4 percent in 2023.

The projected actuarial deficit over the 75-year long-range period is 3.50% of taxable payroll, according to the report. That is lower than the 3.61% projected last year.

The board did note that, when taken separately, the OASI trust fund alone would be depleted in 2033. It also found that the ratio of reserves as compared to annual cost is projected to drop from 188% at the beginning of 2024 to just 84% at the start of 2030, staying below 100% for the next 10 years. Because of that ratio drop below 100%, the trust funds will fail the board’s test of short-range financial adequacy.

The Social Security board has space for six members, with four currently serving due to their position in the Federal Government: Janet Yellen, Secretary of the Treasury and Managing Trustee; Martin O’Malley, Commissioner of Social Security; Xavier Becerra, Secretary of Health and Human Services; and Julie Su, Acting Secretary of Labor. Two public trustee positions are currently vacant.

Advisory M&A News – 5/6/24

Sanctuary Wealth announces acquisition of Tru Independence; MAI Capital Management adds Harbor Wealth Management; Avantax acquires Integrated Tax & Wealth Strategies’ wealth management business.

Sanctuary Wealth Announces Acquires Tru Independence

Sanctuary Wealth announced the acquisition of tru Independence, a Portland, Oregon-based enterprise that supports 30 registered investment adviser firms managing $12.5 billion in client assets. The combined entity will support approximately 120 independent wealth management firms managing over $42 billion of client assets across 30 states.

“Sanctuary and tru have built their businesses on partnered independence, where being independent does not mean going it alone,” Adam Malamed, CEO of Sanctuary Wealth, said in a statement. “[T]ru is a pioneer in independent wealth management and an innovator in supporting elite advisers who wish to own their own RIAs.”

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Financial advisers at both organizations serve high-net-worth and ultra-high-net-worth clients. Upon completion of the transaction, the firms will operate as distinct entities, maintaining their established brands and leadership teams, while working together to provide each enterprise’s offerings. Craig Stuvland founded tru Independence in 2014 and is the firm’s CEO.

“Together, we are confident top-quintile advisors across the wealth management space will quickly appreciate everything our expanded enterprise represents and will be eager to take advantage of affiliation options that best suit their practices, staff and clients,” Stuvland said in a statement.

MAI Capital Management Adds Harbor Wealth Management

MAI Capital Management, an RIA specializing in serving high-net-worth individuals and families, announced the acquisition of Harbor Wealth Management. The firm had $321 million in client assets under management at the time of the acquisition.

With a presence in Boulder and Denver, CO, Harbor advises private individuals and families, businesses, company retirement plans and private foundations on all aspects of investment and wealth management. The firm was founded by Elyse Foster in 1988. As part of MAI, Foster and Megan Miller, principal, CIO and wealth manager, will both take on the title of senior wealth adviser, managing director.

“As we thought about the next phase of our business, we wanted a partner who could give us the resources that we need to bring our practice to the next level, while allowing us to focus on what we love the most: serving our clients,” Foster and Miller said in a statement.

Harbor will adopt MAI’s brand identity and receive the internal infrastructure that MAI extends to all acquired firms, including HR, operations, and marketing resources. Harbor joined MAI effective May 3 as MAI’s 37th acquisition since 2018, and its fifth of 2024.

Avantax Acquires Integrated Tax & Wealth Strategies’ Wealth Management Business

Avantax, which specializes in tax-focused financial planning and wealth management, has acquired the wealth management business of Integrated Tax & Wealth Strategies, one of the largest businesses within the Avantax Community, with $760 million in total client assets as of December 31, 2023.

Integrated Tax & Wealth Strategies’ founder, Brian Stephens, will continue with the tax practice. The firm’s other financial advisers and wealth management team have become W-2 investment adviser representatives of Avantax Planning Partners.  

“I’ve seen several other advisers align with Avantax Planning Partners, and while I looked at various options even outside of Avantax, I realized that other broker-dealers don’t understand our business model where tax preparation is such a key component of the investment relationship,” Stephens said in a statement. “I feel Avantax is the right answer because they are 100% aligned with my belief that the best solution for clients is to keep investment and tax preparation tied together.”

Stephens’ wealth team, including Matt Murch, Joseph Webster, Sabrina Pledger, Amy Villarreal, Kyle Pledger and Cheryl Wright, have joined Avantax as employees and will continue to support the relationships the team has built over the past 25 years.

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