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Americans are concerned about the long-term viability of safety net programs like Social Security and Medicare as they battle rising costs, according to a new CFP Board survey.
In a survey of 440 CFP professionals who work with clients to create financial plans, half of the advisors surveyed said they had seen their clients take actions to control costs that could jeopardize their retirement plans.
The CFP Board, which certifies financial advisors as Certified Financial Planners, compiled its responses from July 9 to July 27. The margin of error was plus or minus 4.7 percentage points.
Most CFP professionals (68%) say their clients’ overall financial outlook is positive. But over the past 12 months, 69% of clients have become more concerned about affordability, according to CFP professionals surveyed.
These concerns include concerns about both long-term goals (60% of respondents) and day-to-day expenses (53%). The government’s latest inflation statistics for August showed that inflation rose at an annual rate of 3.4%, well above the US Federal Reserve’s 2% target.
“Americans believe affordability is an issue across all income and wealth levels,” said Kevin Ross, managing director of research at the CFP Board.
Policy concerns are growing
Social Security, which provides monthly benefits to more than 75 million Americans, is the top concern, with 78% of CFP professionals saying their clients are concerned about the long-term viability of the program, according to the survey.
Social Security is projected to run out of trust funds within the next decade, which could lead to across-the-board benefit cuts if lawmakers don’t act sooner.
Meanwhile, 73% of CFP professionals say their clients have similar concerns about Medicare, which is on the verge of depleting the hospital insurance trust fund that funds Medicare Part A services.
Those funding shortfalls mean benefits and the taxes that support them could change, Ross said.
Clients have also noted other affordability concerns related to public policy. CFP professionals surveyed cited concerns raised by clients, including healthcare, with 88%. Retirement plan also accounted for 88%. Tax, 84%. gas and energy prices, 56%; The interest rate is 55%.
Ross said rising prices and potential safety net changes indicate the need to speak with a competent financial advisor to stress test your financial plan.
“If you need to change your plans, the time to change them is today, not five months before retirement,” Ross said.
What investors are doing and what advisors are recommending
Advisers say affordability concerns are leading clients to make decisions after the fact. This includes early withdrawals from retirement accounts and is 29%. Reduction or elimination of retirement benefits, 20%. or incurring high-interest debt, 18%.
Most CFP professionals, 85% of whom have recommendations focused on maintaining their clients’ long-term goals amid affordability pressures. These suggestions included stress testing financial plans for a potential recession, which accounted for 54% of responses. 54% also built an emergency savings fund. Retirement savings contribution rate re-evaluated, 34%. and accelerated debt repayments, 33%.
According to 75% of CFP professionals surveyed, most clients have taken action or are considering taking action in response to rising costs. But CFP experts say only 29% made economic moves in anticipation of the November election.
Notably, CFP professionals surveyed said they do not expect the November election to have a significant impact on the financial health of their clients.
Still, about two-thirds of CFP professionals expect to modify their clients’ plans within the next year, Ross said. This may be partly driven by changes in affordability, he said.
