North Bay wealth advisers recommend retirement savings beyond Social Security

JDH wealth adviser Matthew Delaney uses one prop in some of his talks – a suitcase full of cash dumped on a table.

He tells his audience it is the “free money” they give up when they shrug off taking advantage of a retirement plan at work — especially when the company offers to match their contributions. And to those want to buy now and save later, he responds: “Rubbish.”

To him, there’s no excuse.

“We just gotta get people to lift their heads out of the sand. Everybody always thinks they spend less than they do. But it all adds up quickly.”

For example, that one $4 gourmet coffee drink bought every day may turn into a $1,500-a-year expense annually.

And for those depending on Social Security, here’s some bad news. The government’s entitlement program — Social Security — is creeping toward insolvency at a faster rate than once planned to 2034. Recently, Social Security and Medicare trustees said that financial wall will be a year earlier. They blame a brief recession for cutting revenues from payroll deductions.

“I think it’s the responsibility of business to put the vehicle in front of their employees,” said Delaney, who has written a book about the subject. “Your Retirement Bodyguard,” which is due to be released in December, covers topics from how to avoid credit card debt to managing a family and an estate.

Delaney understands that when employees who get an opportunity to participate in 401K plans hear they should allocate 10% of their income to retirement many get discouraged.

“They just hope for the best with Social Security,” he said.

Most advisers agree Americans saved more during the pandemic but wonder if the behavior will stick long after social distancing and shutdowns subside.

Some see a glimmer of a bright spot. The COVID-inspired hunt for workers has prompted more companies to offer retirement plans to attract or retain workers.

“The best companies are going to offer a 401K retirement plan. And some will aggressively match (the contributions). It’s not their responsibility, but the best ones do,” said Steve Branton, wealth adviser at Private Ocean.

The San Rafael financial planner refers to a 401K as part of a retirement plan that resembles a tripod, with one leg dedicated to the employer-sponsored plan. The second leg is defined as Social Security, factoring in a possible pension if offered. The third is made up of “other assets” that may amount to investment accounts.

“People do best when they have all three legs,” he said.

“Any adviser in a population center would never tell a client Social Security in enough,” he said. “Simply, costs are going up. And some people are upside down (on a cost benefit ratio).”

To ease the burden of Social Security’s upcoming shortfall, Branton suggested the federal government’s overseer may consider cutting benefits.

“But I don’t see that happening,” he said.

With a quarter of the 65 million seniors who rely on the entitlement for 90% of their income, even a slight dip in benefits would result in dire consequences for the population.

The other means of paying for such a discrepancy may turn out to be a raise in taxes on the Social Security wage base rate, Branton mentioned.

“But that’s a political football,” he said.

Another option may lie with the feds making people wait longer to receive full Social Security benefits to essentially buy some time as the surge of baby boomers entering retirement eases.

“They’ll have to weigh short term versus long term,” he said.

The lack of a plan for seniors entering retirement age becomes a problem when people are quicker to spend than to save — especially when it comes to helping out loved ones.

“I see parents who’ll pay for grad school for their kids when they don’t know if they have enough for retirement,” he said.

A long way to go

John Mackey, senior vice president of the trust and investment management division at Exchange Bank in Santa Rosa, stressed the pressure to act on retirement options because “people are living longer” and the days of companies offering pension plans are waning.

“Those days are gone, and public employees are the ones getting the benefits,” he said.

That’s why Mackey is also convinced business needs to step up and fill in the gaps.

“I think it’s a moral obligation to help a person plan for their retirement,” he said.

The uncertain future

Bruce Raabe of Relevant Wealth of Mill Valley noted all discussion over what to do with the Social Security program could be thwarted with the federal government’s own prudent planning before reaching the 2034 milestone.

“It’s hard to make a forecast going out to 2034, but it’s never been an important time for each of us to think about retirement,” he said.

Susan Wood covers law, cannabis, production, biotech, energy, transportation, agriculture as well as banking and finance. For 25 years, Susan has worked for a variety of publications including the North County Times, now a part of the Union Tribune in San Diego County, along with the Tahoe Daily Tribune and Lake Tahoe News. She graduated from Fullerton College. Reach her at 530-545-8662 or susan.wood@busjrnl.com