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Integrity of Social Security now may affect estate plans later

social-secuity-retirement-estate-plan-frese-hansen.jpgYou hear a lot of time from financial experts that everyone should save early and save as much as they can before they retire. This makes sense when you consider one important fact: you won't be working anymore, which means no steady paycheck each week. Whatever you save now will determine the lifestyle you can have when you're retired -- padded, of course, by the retirement benefits you receive through Social Security. Right?

Well, if current estimates are accurate, then this may not be the case for people who are in their 30s and 40s. That's because, according to the trustees in charge of the Social Security retirement fund, the trust will only be able to pay out full benefits to retirees until about 2034. Unless Congress makes the necessary changes to payroll taxes, the trust after this point will only be able to pay out about 75 percent of benefits. This could have a huge impact on future retirees who may be relying on these funds down the road to offset what they lost during the Great Recession and crash of the housing market.

It's because of this uncertainty with the retirement fund that financial experts are now encouraging people in their 30s and 40s to save considerably more now than they normally would. If this age group does not adjust now for the possibility that they will not receive full retirement benefits in the future, they could be caught off guard by health care costs and day to day expenses they thought would be covered by Social Security benefits.

Although the stability of the Social Security retirement fund could be remedied through congressional action, experts say that people should not assume that there will be a fix and should make plans that account for a worst-case scenario. Even if Congress takes action and the retirement fund is stabilized, making changes now to your own retirement fund and estate plan could benefit you financially down the road, affording you a more "comfortable" retirement in the end.

Sources: USA Today, "Retirement: What the new Congress has in store," Rodney Brooks, Jan. 13, 2015

The Seattle PI, "House GOP forcing 2016 debate on Social Security's finances," Stephen Ohlemacher, Jan. 10, 2015

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