Compliance July 14, 2017

Social Security Trust Fund Still Projected to be Depleted by 2034

However, the Disability Fund depletion date has improved by five years, through 2028.
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The Social Security Board of Trustees announced the financial status of the Social Security Trust Funds.

The combined asset reserves of the Old-Age and Survivors Insurance and Disability Insurance Trust Funds are projected to become depleted by 2034, the same as last year, with 77% of benefits payable at that time. The Disability Industry Trust Fund is projected to become depleted in 2028, extended by five years from last year’s estimate of 2023, with 93% of benefits payable.

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The Board also announced that the asset reserves of the Old-Age and Survivors Insurance and Disability Insurance Trust Funds increased by $35 billion in 2016, for a total of $2.85 trillion. The Board expects that the reserves will continue to grow through 2021. However, beginning in 2022, the cost of the program is expected to exceed income.

In order to extend the life of the Social Security funds past 2034, Congress needs to act, the Board said.

“It is important for the public to engage in the important national conversation about how to keep Social Security strong,” says Nancy Berryhill, acting commissioner of Social Security. “People understand the value of their earned Social Security benefits and the importance of keeping the program secure for the future.”

The report also noted that total income, including interest, from the Old-Age and Survivors Insurance and Disability Insurance Trust Funds was $957 billion in 2016, with $836 billion coming from contributions, $33 billion from taxation of benefits, and $88 billion in interest.

Total expenditures from the funds amounted to $922 billion in 2016. The projected actuarial deficit over a 75-year long range is 2.83% of taxable payroll, an increase of 17 basis points from last year. In 2016, 171 million people had their earnings taxed to pay Social Security. The Social Security program cost $6.2 billion to run in 2016, representing 7 basis points of total expenditures. The interest paid on the funds in 2016 was 3.2%.

The 2017 trustees report may be downloaded from here.

Data & Research July 13, 2017

Gen X Investors Describe Serious Financial Stress

FICO's latest consumer finance trend research finds only a third of consumers between ages 38 and 52 are confident they will reach their long-term financial goals.
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A new FICO survey highlights the big challenges faced by Generation X, also commonly referred to as the “sandwich generation,” due to substantial financial obligations to both aging parents and young children.

According to FICO survey data gathered from 1,000 U.S. survey respondents, only 32% of Gen X say they are confident they will reach their long-term investing goals, while 41% feel they need to save more for the future than they are today.

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Tim Van Tassel, vice president of FICO’s credit lifecycle business line, says the survey confirms genuine anxiety felt by Gen X about debt and saving levels in the aftermath of the 2008 recession.

“The sandwich generation is often financially overwhelmed by the competing obligations of having to care for both kids and aging parents,” Van Tassel warns. “This obstacle to saving means they have a real concern about a potential retirement income shortfall.”

The FICO research finds Generation X is the least confident about reaching long-term financial goals, compared with 45% confidence among older Millennials and 46% confidence among younger Millennials. Boomers are only a little more confident (36%) than Gen X.

“A core group of Gen X are paying down debt and improving their position,” Van Tassel adds. “However, this is a struggle for many people in this group. Numerous people in the survey said they were struggling with a drop in real income levels along with high credit card debt. Simple customer engagement strategies focused on cross-selling additional products aren’t going to be effective with these consumers. They want intelligent, personalized recommendations that will help them meaningfully improve their financial security.”

For financial institutions, Van Tassel says the goal to helping Gen X is to try to banish apathy.

“Present them with financial products and solutions that build trust and help them navigate issues like debt before a competitor does,” he concludes. “We are seeing the industry’s innovators using analytics to create appealing offerings that are tailored to the customer, allowing them to build repeat business and reduce churn.”

Additional research and information from FICO is available here. 

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