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Entrusted With Security

Retirement was a rotund, self-satisfied guy in a suit, puffing an enormous cigar. Well, that’s what it looked like when I was in college.
He was a former insurance public relations flack visiting the college; I was a journalism student regarding him with pure, youthful disdain. The man may as well have been curling his thumbs under suspenders decorated with dollar signs, snickering “nyah, nyah, nyaaaah,” as he spoke. And yes, he smoked the cigar indoors — this was The Old Days.
But that was decades before I would work for an insurance association as a PR professional and would consider “flack” an unpardonable insult. Public relations didn’t look so bad after nearly two decades of being kicked around the newspaper business.
I am starting to appreciate the satisfaction of a secure retirement. Back in the early 1980s, that retired PR guy probably enjoyed a pension along with Social Security. Now we are balancing on the one leg of Social Security, and we are all a little anxious about that one.
In this month’s interview with Publisher Paul Feldman, Tom Hegna discusses all things retirement. Social Security planning was a particular area of focus in his discussion. It was the second of seven steps to retirement.
“I just implore people to make an educated decision on the most important retirement decision of their lives, which I would argue is this Social Security start date,” Hegna says.

Ensuring Security

Hegna has made retirement his career since his days with a couple of major insurance mutuals. He argues that retirement security is the central duty of all agents and advisors. And who is to argue with that?
After all, security is ultimately what we are seeking when we buy insurance products or invest. We want to be safe from the vicissitudes of life.
Lovely word, right? Vicissitudes, meaning a change of fortune, usually for the worst. I read it in a speech that President Franklin D. Roosevelt gave after signing Social Security into law in 1935. I stumbled across it as I was rooting around for information on the program.
The context in which Roosevelt used the word might surprise some people who are prone to think that the program was designed to protect retirees against all risks.
“We can never insure 100 percent of the population against 100 percent of the hazards and vicissitudes of life,” Roosevelt said. “But we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.”
Also instructive was how he framed the problem: “The civilization of the past hundred years, with its startling industrial changes, has tended more and more to make life insecure.” Doesn’t that sound familiar?
Post-World War II was the glory era for pensions. Stay with a company long enough, you would enjoy another monthly check alongside your Social Security. Invest wisely and you can collect those checks while enjoying your favorite beach. There you have the three legs of the retirement security stool.
With the demise of pensions, Americans are balancing on two legs — perhaps with a majority making do with only one.
Hegna argues that advisors have a duty to help their clients recognize that they can create their own pension with annuities. Or at least to inform their clients about annuities.
That security is the key to happiness. Hegna points out that quite a few studies have discovered that happy people are often those with a guaranteed income. Of course, those studies are often sponsored by financial and insurance companies, but it certainly stands to reason.
Without that financial security, clients are left hanging onto their nest eggs, terrified of spending them down.

Speaking Of Fiduciary Responsibility

Social Security’s trustees set off alarms when they recently released their 2018 annual report, which said the fund will be depleted by 2034. But two key points seemed to be overlooked by the alarmists.
One is that the program’s income would still cover 79 percent of benefits, declining to 74 percent over 75 years. The other is that this would happen absent any changes.
Some would use this as an excuse to raise the retirement age, lower benefits or privatize the system. Although the ideas are worth discussing, they seem to be falling short of the U.S. government’s fiduciary duty to its citizens. We all paid into this system as an annuity, trusting the government to live up to its end of the bargain.
Another idea is raising or eliminating the cap on taxable income for the Social Security tax. This year, any income above $128,700 is not taxed by Social Security.
There is the argument that people above that level of income do not rely on Social Security so they should not have to pay more into it. Of course, that reasoning could apply to many government services.
Wouldn’t we all pay if Social Security becomes an ineffectual hedge against retirement risk?
Here is another part of that Roosevelt speech: “It is a structure intended to lessen the force of possible future depressions. It will act as a protection to future Administrations against the necessity of going deeply into debt to furnish relief to the needy. The law will flatten out the peaks and valleys of deflation and of inflation. It is, in short, a law that will take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness.”
Imagine how much deeper the 2008 crash would have been without Social Security. Everybody was touched in some way by the collapse, but older Americans would have been particularly vulnerable if their Social Security were some form of 401(k). How well have those funds ensured a secure retirement?
Social Security is an American institution that has served us well for more than 80 years. Let’s not be the generation that breaks it.

Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. Steve may be reached at [email protected] Follow him on Twitter @INNSteveM. [email protected].

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