This week, I’m sharing with you several types of stress tests that you should run on your retirement portfolio. Just like a stress test in the cardiologist’s office, a controlled test on your retirement portfolio helps you see the potential holes in your plan and address them before they lead to major issues down the road. 

Today, I’m talking about one of the most common fears among retirees - cuts to social security. My clients fret about this all the time, and for good reason - if you’re the average American worker, social security makes up about 40% of your income in retirement. With it being such a big source of income for many of us, potential cuts to social security is a big deal and would be catastrophic for many. 

Just like a wasteful and frivolous trust fund baby who has squandered every last dime of their inheritance, the U.S. has done the same thing. The social security trust fund is projected to go broke in just 15 years - in 2035. 

For a variety of reasons, and mostly because it will be so unpopular to address, lawmakers just keep kicking the can down the road, and will keep doing so until social security is in a true crisis and must be addressed. Which looks to be about 15 years away. 

What’s important for retirees to realize is that with so many Americans dependent on social security, it’s extremely unlikely that you’ll see cuts to your social security once you start collecting your check. So I don’t think it’s a reasonable stress test to perform if you’re really close to retirement or if you’re already receiving benefits, because it’s just so unlikely that the rug will get pulled out from under you. 

However if you’re 35 like me, or even 45 or 55, running a stress test on your retirement that includes what would happen if social security is lower than you planned (perhaps 10-20% lower) or that you can’t collect social security until you turn 70) is a worthwhile stress test. In all likelihood, the empty trust fund will be replaced with a combination of tax increases on working Americans and a delay in the age in which you can receive benefits. So what would happen to your plan for retirement if your monthly check were 10 or 20% lower or your couldn’t take social security until age 70. If you’re 55 years old or younger, it’s a worthwhile stress test to run on your retirement. 

That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip.

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