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Social Security has a 13-year window for paying full benefits. At that point, benefits may be reduced unless Congress acts sooner.
If you want to know how benefit cuts would affect you, certain calculators can help.
While it’s generally still wise to plan under current rules, stress-testing your plan can identify changes that may help if benefits are reduced, one expert said.

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How to measure the effects of a benefit cut

Covisum, a provider of Social Security claiming software, recently updated its calculator to reflect the Social Security trustees’ latest projections. Offerings include a free version for consumers and a more complex paid version for financial advisors.

Another product, Maximize My Social Security, lets consumers evaluate for a $40 annual fee which claiming strategy might best suit them. It also has a separate version for financial advisors.
The free Covisum calculator can help people do a quick calculation based on their benefits alone and some key facts — year of birth, full retirement age benefit amount, percentage of the benefit cut and the year that benefit cut occurs.
So someone turning their full retirement age this year, for example, can calculate the effect of a 23% reduction in benefits starting in 2034, as well as the effect of no benefit cut. For each scenario, the calculator will show the value of claiming either at age 65 or age 70, and when beneficiaries stand to get the maximum amount possible from the program. As beneficiaries live longer, the value of waiting to claim until 70 goes up, as demonstrated in the difference in total benefits per the tool’s calculations.

The free calculator is just a starting point, though, when it comes to getting a sense of the trade-offs when claiming Social Security, according to Joe Elsasser, founder and president of Covisum.
Because there are thousands of Social Security claiming rules, a more in-depth analysis can help identify the best way to get the most from the program for your unique situation.
For example, married couples really should coordinate their benefit choices, Elsasser emphasized.
“Couples should make the decision together because on the first death the smaller benefit goes away and the larger benefit continues,” Elsasser said.

Why it’s important to stress-test your plan

It’s also important to remember the current depletion date projections are subject to change, as the Social Security trustees amend their projections each year.
Moreover, congressional legislation could change the program’s funding status before that date. That may include higher taxes, benefit cuts or a combination of both. Washington Democrats have put forward proposals that call for raising taxes on the wealthy while making benefits more generous.

Elsasser said he doesn’t necessarily tell his clients to plan for a benefit cut but that it is important to gauge the potential impact.
“We advise them to plan under current rules, because in the past, there’s always been a compromise,” he said. “But then stress-test the plan and say, ‘Are we OK if we do get a benefit cut? And if we do, what is our plan?'”
If the outcome is unacceptable, then it may be time to make changes such as reducing spending, saving more or working longer to make sure you can weather those possible cuts, Elsasser said.

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VMware at the NYSE, Dec. 14, 2021.
Source: NYSE

Investors’ attention has returned to the Federal Reserve after a hot November jobs report last week.
That’s because even though the central bank has pushed interest rates higher, the economy continues to add jobs and wages keep rising. Friday’s report on last month’s payrolls surprised investors and chilled sentiment.

Nevertheless, investors need to keep a longer-term outlook as they decide how to best position their portfolios. To that end, here are five stocks chosen by Wall Street’s top pros, according to TipRanks, a service that ranks analysts based on their track record.

VMware

While software company VMware (VMW) reeled from lackluster quarterly results, Monness Crespi Hardt analyst Brian White maintained his positive conviction on the stock.
Importantly, the company will soon be acquired by Broadcom (AVGO). According to the agreement between the companies, VMware shareholders can either cash in their shares at $142.50 per share or choose to exchange their holdings for 0.2520 shares of Broadcom for each share of VMware. However, in all probability, shareholders may end up with a 50-50 split between cash and stock.
This is important, as this deal has enabled VMware to “dodge the 2022 tech apocalypse,” in White’s words, with the stock up 4% in 2022.
Given the pending acquisition, VMware did not issue any guidance. However, White remains bullish on the basis of the shareholder benefit as well as the stable position of VMware in the tech sector.

“VMware’s earnings remain depressed after aggressive investment initiatives and a model transition. At the same time, the current economic and geopolitical environment is daunting, resulting in a more uncertain future, creating a greater allure for large, well-managed, stable, tech companies with benefit from digital transformation, such as VMware,” White theorized.
White is ranked No. 697 among more than 8,000 analysts tracked on TipRanks. The analyst has a record of 55% successful ratings in the past year, with each rating generating average returns of about 8.7%.

Diamondback Energy

Oil and natural gas exploration company Diamondback Energy (FANG) has gained the attention of RBC Capital Markets analyst Scott Hanold after making two significant strategic acquisitions recently. The analyst expects the acquisitions to be accretive to his earnings per share estimates for 2023 and 2024 by 7% to 9%.
Importantly, at a time when almost every company has worrisome near-term prospects, Hanold sees a solid upside to Diamondback’s near-term free cash flows, thanks to its latest acquisition of Permian Basin assets from Lario. (See Diamondback Dividend Date & History on TipRanks)
The analyst is also upbeat about Diamondback’s asset monetization plan, and believes that it will help the company maintain a clean balance sheet even after the two recent acquisitions. “We think FANG will still maintain an adjusted leverage ratio below 1.0x following the close of the two transactions. However, we think the company will progress more to exceed its $500 million asset monetization target with a focus on midstream assets that trade at more robust values in the market,” said Hanold, who reiterated a buy rating and $182 price target on the stock.
Impressively, Hanold holds the 8th position among more than 8,000 analysts on TipRanks, and boasts a 70% success rate. Each of his ratings has generated average returns of 33.7%.

Microchip Technology

The next stock on our list is Microchip (MCHP), a leading manufacturer of embedded control solutions. The company’s exposure to secular growth trends in the end-markets of 5G, artificial intelligence/machine learning, Internet of Things (IoT), advanced driver assistance systems (ADAS), and electric vehicles bode well for the company in the long run.
Recently, Stifel analyst Tore Svanberg recently reiterated a buy rating on MCHP stock and even increased the price target to $80 from $77. (See Microchip Stock Chart on TipRanks)
The analyst believes that Microchip is well positioned to “manage a softer landing relative to peers during broader industry correction,” on the basis of solid near-term backlog visibility, defensive end-market exposure, resilient pricing of proprietary products, etc.
Svanberg stands at No. 41 among more than 8,000 analysts followed and ranked on TipRanks. The analyst also has a solid track record of 65% profitable ratings and average returns of 20.4% for each.

Analog Devices

Analog Devices (ADI) is another stock on Tore Svanberg’s buy list. The manufacturer of high-performance analog, mixed-signal and digital signal processing integrated circuits holds the biggest shares of the data converter and amplifier markets.
“We believe ADI is a formidable high-performance analog/mixed-signal powerhouse with pro forma CY21A revenue of (nearly) $10 billion, and the leading challenger to the current industry heavyweight, TXN (Texas Instruments),” said Svanberg.
Analog Devices also has strong cash flow generating capabilities, which kept Svanberg bullish: The company has generated $3.50 billion in the past 12 months. (See Analog Devices Hedge Fund Trading Activity on TipRanks)
The analyst sees Analog Devices outperforming its peers in the present challenging macroeconomic environment. Based on his observations, Svanberg increased his price target to $195 from $190.

CrowdStrike

A leading name in the cybersecurity space, CrowdStrike (CRWD) disappointed investors and analysts alike recently with weaker-than-expected guidance. This underscored the vulnerability of the software sector to macroeconomic forces.
Nonetheless, Deutsche Bank analyst Brad Zelnick remained focused on the longer-term prospects of CrowdStrike, calling it one of the three best-positioned security companies to overcome the strong headwinds. (See CrowdStrike Holdings Financial Statements on TipRanks)
Zelnick observed solid traction in large deals and a strong existing customer base, which can support the company through challenging times.
The analyst also observed that despite not being able to deliver on the top-line part of the business, CrowdStrike was consistent in maintaining solid margins, reflecting “the flex/leverage in the business model.”
Although Zelnick lowered the price target to $150 from $230 to account for his lower estimates, the analyst maintained a buy rating after looking beyond the storm.
Interestingly, among more than 8,000 analysts on TipRanks, Zelnick is ranked 128th, having delivered successful ratings 67% of the time in the past year. Moreover, each of his ratings has garnered average returns of 15.10%.

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In 401(k) plans with voluntary enrollment — meaning employees have to actively sign up — women are more likely to participate than men.
The largest difference is in the $50,000-to-$74,999 income range: 81% of women participate versus 67% of men.
The House passed a bill in March that would require many 401(k) plans to auto-enroll their workers, although it’s uncertain whether it will make it into law this year.

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Some men may need a bigger push than women when it comes to participating in their workplace retirement-savings plan, new research suggests.
In 401(k) plans with automatic enrollment — meaning employees must opt out if they don’t want to participate — 93% of both men and women remain signed up, according to a report from Vanguard. But in plans whose enrollment is voluntary — workers have to actively enroll — men lag behind women in participation rates at all income levels, most notably below $150,000.

The largest difference is in the $50,000-to-$74,999 income range, with 81% of women participating versus 67% for men.
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“The savings behavior of women is on par or in some cases … better than men,” said Dave Stinnett, head of strategic retirement consulting at Vanguard. “It just doesn’t get reflected [in account balances] because men have higher incomes.”

Men earn more and save a larger share of it

The average 401(k) balance among men in 2021 was $93,512, compared with $70,037 among women, the Vanguard research shows.
In part, that’s because men have a higher average deferral rate — the percentage of income put into the plan — of 7.5%. For women, it’s 7%.

Men also earn more, so that higher deferral pulls in more cash. For every dollar earned by men working full-time, women earn 83.4 cents, according to recent data from the U.S. Bureau of Labor Statistics.

Both men and women benefit from auto-enrollment

In auto-enrollment plans, women also remain as participants at a slightly higher rate than men in the under-$150,000 income range, although the difference is not more than 3 percentage points in any given income bracket, according to the Vanguard research. 
Overall, however, both women’s and men’s participation rate — 68% and 65%, respectively — in voluntary enrollment plans is much lower than the 93% rate in auto-enrollment plans.

Auto enrollment is considered one of the best ways to increase participation in 401(k)s and similar workplace retirement savings plans. However, not all employers’ plans use it due to both administrative complexity and cost.
“The main cost is the employer match,” Stinnett said, explaining that higher rates of participation due to auto-enrollment results in more workers getting a matching contribution from their employer.
“That’s something you have to budget for as an employer,” he said. “It’s an increased cost.”

Required auto-enrollment might be on its way

There’s a chance that Congress could begin requiring many employers to auto-enroll as part of a broader effort to improve the U.S. retirement system. The House passed a bipartisan bill in March known as Secure 2.0 — a nod to the original Secure Act of 2019 — that would require auto-enrollment except in existing plans, businesses with 10 or fewer employees and companies that are less than three years old.
The Senate’s version of Secure 2.0 would not mandate auto-enrollment but would provide incentives for companies to implement the feature. It’s uncertain whether the bill will pass this year, before the next Congress is seated, although supporters are optimistic.

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Handout | Getty Images Entertainment | Getty Images

Company: Walt Disney (DIS)

Business: Disney is one of the most iconic entertainment companies globally. It operates through two segments, Disney Media and Entertainment Distribution; and Disney Parks, Experiences and Products. Disney engages in film and TV content production and distribution activities, as well as operates television broadcast networks and studios.
Stock Market Value: $181.3 billion ($99.43 per share)

Activist: Trian Fund Management

Percentage Ownership:  n/a
Average Cost: n/a
Activist Commentary: Trian runs a concentrated portfolio of 8 to 10 mid- to mega-cap, publicly traded companies where it actively engages with management with the goal of enhancing long-term shareholder value. Trian, managed by Nelson Peltz, takes very few positions, but is very active in the fund’s positions. Peltz calls his formula “operational activism.” He defines it as working the managements of high-potential but underachieving companies to raise earnings by paring overhead, shedding ancillary businesses, and most of all, burnishing famous brands.
Trian calls itself a “constructivist,” implying a more friendly activist investor. First, let me say I dislike that word for two reasons. For one, it suggests that activists that are being confrontational cannot also be constructive. Second, I don’t think any good activist is a “constructivist” or a “confrontational” activist. How amicable or confrontational an activist is in any given situation depends on many things, most of all the response of the company. Trian, like most activist investors, intends to be friendly and always starts off that way, and then it is up to the company to respond. It is often the company that decides how confrontational a situation might get. GE invited Trian on to the board; Procter & Gamble did not. Trian was not a “constructivist” investor at GE and a “confrontational” investor at Procter & Gamble. The firm is an activist investor, plain and simple.

What’s Happening?

On Nov. 21, The Wall Street Journal reported that Trian Fund Management took an approximately $800 million stake in Disney. It was also reported that Trian was interested in growing this stake and would likely be acquiring more stock, which is consistent with the size of positions Trian historically takes in mega-cap companies. The investor is reportedly seeking a board seat, advocating for the company to make operational improvements and reduce costs, and it has expressed its opposition to Robert Iger’s reappointment as CEO.

Behind the Scenes

In this situation, Trian seems to be looking for a board seat and is urging Disney to make operational improvements and reduce costs. This is very similar to what Dan Loeb and Third Point were advocating for at Disney earlier this year. On Sept. 30, Disney reached a deal with Third Point, including adding former Meta executive Carolyn Everson to its board of directors. On Nov.11, Disney announced companywide cost-cutting measures and told division leaders that layoffs are likely. This will include a ban on all but essential work travel and a freeze on new hires for all but a few critical positions. So, a lot of what Trian is looking for – board change (particularly with former CEO Bob Chapek now off the board) and cost reduction – has either already happened or is in the process of happening.
Another thing about Trian is that it’s a very thoughtful investor, known for its detailed, comprehensive white papers. The firm did not go into this without a plan and that plan was far from spontaneous or reactive. It was a plan that Trian has likely developed over many months. And it was presumably thrown for a loop when Disney announced that it replaced Chapek with former CEO, Bob Iger. The fact that Trian had not yet built its full position when its holding was reported is more evidence that the firm felt it had to go public about its investment earlier than it wanted to in reaction to Disney’s announcement. Iger was an extremely respected and value-adding CEO at Disney for many years and the stock has reacted favorably on this news. So, it is interesting that Trian is reportedly opposing Iger’s appointment. Nor is the firm throwing its support behind outgoing CEO Bob Chapek. Knowing Trian and knowing activists as we do, this could mean only one thing: Trian’s plan includes its own idea for a new CEO, something that would have been a lot easier to implement last week before Chapek was replaced by Iger.
This is going to be an uphill battle for Trian. Disney recently reached a deal with activist investor Third Point and is not likely to settle with another activist for a board seat, particularly in light of all of the changes it has already made. Moreover, Trian would likely want Nelson Peltz or Ed Garden to be the firm’s representative on the board and Nelson is already on three public company boards (Unilever, Wendy’s and Madison Square Garden) and Ed is on two (GE and Janus Henderson Group). Disney is definitely in need of serious change, but in the past three months the company has announced a cost-cutting plan, refreshed the board and changed its CEO. It is not unreasonable to see if these initiatives work before considering additional changes. If Disney does not offer a seat to Trian, the firm would have to resort to a proxy fight to gain a seat, which it is unlikely to win on a platform of more change and opposing Bob Iger as CEO. We will definitely know more soon, as Trian has until Dec. 9 to nominate directors for the 2023 annual meeting of shareholders.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and he is the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments. Squire is also the creator of the AESG™ investment category, an activist investment style focused on improving ESG practices of portfolio companies. 

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Dreams of a comfortable retirement may elude many Americans due to a lack of adequate savings.
The problem starts with not having access to retirement plans at work, experts say.

Secretary of Labor Marty Walsh speaks during a news conference at the White House in Washington, April 2, 2021.
Erin Scott | Reuters

Most American workers dream of a comfortable retirement.
Yet many find their money falls short of meeting that goal when they reach their golden years.

Much of the problem has to do with how the retirement system has evolved. Pension plans that used to guarantee a stream of post-career income from employers have given way to 401(k) plans and other retirement accounts that put the responsibility on workers themselves to save.
On Thursday, private and public industry leaders came together in Washington, D.C., at an event hosted by the Employee Benefits Research Institute to identify ways to better help workers avoid a shortfall.
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U.S. Secretary of Labor Marty Walsh recalled how his father, a construction worker, retired with a pension and annuity that has enabled his mother to remain financially stable when he died.
“There are too many Americans who don’t have that future stability,” Walsh said. Having a retirement plan is an “essential component” of a good job, he added.

Yet many Americans don’t have any retirement savings or plan at all, and many of those workers are approaching the end of their working careers, Walsh said.
For people of color, the situation is even more dire, he noted. Just 36% of Black households ages 55 to 64 have any retirement savings, and that number goes down to 30% for Hispanic households. Those that do have savings often have very little set aside, according to Walsh.
“This is a crisis that we have to address in the United States of America,” Walsh said.

Increasing access to savings

Lucy Lambriex | DigitalVision | Getty Images

Many people do not save for retirement because they do not have the opportunity.
As many as 57 million Americans lack access to a workplace retirement savings plan, said Ed Murphy, president and CEO of Empower, a provider of retirement services.
“We know that if people aren’t covered by workplace savings, they don’t save,” Murphy said. “If they don’t access through payroll deduction, they just flat out don’t save.”
Employers that do not offer retirement plans include small businesses like daycare centers, hair salons, auto shops and restaurants that are “just trying to make it work,” Walsh noted.
The lack of retirement plan coverage presents an opportunity for the financial industry and government to work together to find solutions, Walsh said.

“For too long the message to workers has been you’re not saving enough,” Walsh said. “And that may be true, but that’s certainly not the whole story.”
California is one of a handful of states that has implemented automatic individual retirement accounts to help bridge that gap for workers who lack access to retirement plans through their employers.
The program, called CalSavers, opened in 2019 to employers with five or more employees. Those that opt out are required to begin offering their own retirement plan, per California rules.
CalSavers is seeing positive results, according to Katie Selenski, executive director of the program.
About 65% of employees who are automatically enrolled in the program stay in.
“We’re incredibly proud of that, especially when you consider that they’re really not getting any financial incentive” such as a match through either their employer or the state, Selenski said.

About half of the 230,000 employers in California that have been subject to the mandate thus far have opted into the program, while the other half have registered for an exemption because they have chosen to offer a private plan.
With other states offering similar programs, including Oregon and Illinois, there are 600,000 participants in the state retirement accounts, she said. The mandates are also prompting employers to consider offering their own retirement plans.
“We know we are having an effect on new plan formation, and that’s exciting because by any objective measure, 401(k)s are better than Roth IRAs,” Selenski said.
That is due to the fact that 401(k) plans have higher annual contribution limits, plus they don’t restrict participation based on income, making it possible for savers to put aside more money. However, savers may want to carefully consider the advantages of pre-tax versus post-tax savings when making their contributions.

How Congress may step in

To truly fix the program of a lack of access to retirement plans, there needs to be a federal mandate for employer plan formation with incentives, Murphy said.
“Unfortunately, I don’t think Congress will go that far, because there isn’t a level of support, particularly from the Republican side,” Murphy said. “But I think that’s what’s needed.”
Sens. Rob Portman, R-Ohio, and Ben Cardin, D-Md., said they intend to push for changes to the retirement system in the lame duck session of Congress..

Sen. Benjamin Cardin, right, and Robert Portman, left, arrive to observe Presidential elections in Ukraine.
Nurphoto | Corbis Historical | Getty Images

Among the changes the lawmakers have proposed are an expansion of the saver’s credit to help lower income workers increase their retirement savings; expanding support for small businesses to provide retirements plans through tax credits; adding catch up contributions for older workers who may have fallen behind on their retirement savings; and increasing the age for required minimum distributions.
The lawmakers hope to move the changes with Secure 2.0, a package aimed at advancing retirement legislation passed in 2019. For Portman, who is retiring from the Senate, the legislation may be a last legacy-making move.
“It’s the last couple of weeks of the session, and the question is whether we will be able to get this into a package that’s otherwise moving, or if not whether it’s popular enough we can take it on its own,” Portman said of the lame duck session.
Much depends on whether the changes will be a priority before the end of the year, Cardin acknowledged.
“I don’t believe there’s much controversy in the substance of what we’ve done,” Cardin said. “The question is whether it will be a priority that we can get it accomplished in the days that remain.”

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Major tech firms like Amazon, Meta and Twitter have announced layoffs in recent weeks.
Data suggests the pain hasn’t spread to the U.S. labor market more broadly, according to economists.
However, things could change as the U.S. Federal Reserve continues to raise interest rates and pump the economic brakes.

10’000 Hours | Digitalvision | Getty Images

A recent wave of layoffs in the tech sector may lead American workers to wonder whether their job is next on the chopping block.
So far, evidence is scant that the thousands of cuts at major technology firms — Meta, Amazon and Twitter, to name a few — are bleeding into the U.S. economy at large, according to labor economists.

Federal data points to continued strength in the labor market, characterized by a high demand for workers, ample job openings and layoff rates that, in aggregate, continue to hover near record lows.
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The November jobs report, issued Friday by the U.S. Department of Labor, was the latest evidence of a resilient jobs market that continues to defy gravity. Employers added 263,000 jobs — well above expectations — and the national unemployment rate held steady at 3.7%, just slightly above a half-century low.
In all, the labor market seems to be “cruising” into 2023, said Nick Bunker, head of economic research at the Indeed Hiring Lab.
“I do think what’s happening in the tech sector isn’t really representative of what we’re seeing in the overall economy right now,” Bunker said.

Layoffs at historic lows for almost two years

The federal Job Openings and Labor Turnover Survey, issued monthly, is perhaps the best gauge of layoff trends on a national basis, economists said. The layoff rate — which measures layoffs as a share of total employment — had never fallen to 1% or below before the pandemic era.
That precedent was shattered last year. The layoff rate has been at or below 1% during every month since March 2021, according to JOLTS data.
One caveat: The data lags. The latest release, on Wednesday, was for October. Many tech layoffs were announced in November, meaning they may show up in the next JOLTS report, said Daniel Zhao, lead economist at Glassdoor.
For now, the overall number of American workers laid off has averaged about 1.4 million a month. By comparison, over 2017 to 2019 layoffs averaged about 1.8 million per month, Bunker said.

Put another way: Current layoffs would need to jump by 400,000 a month on a sustained basis to return to 2017-2019 levels — and even that was considered a period of labor market strength, Bunker said.
Elsewhere, job openings — a barometer of employer demand for workers — remain well above their pre-pandemic trend, despite having declined from peak levels earlier this year.
There were about 10.3 million job openings in October. Before the pandemic, that number hadn’t breached 8 million. Businesses are therefore still looking to hire workers at near-historic levels.
Further, the ratio of job openings to unemployed individuals is about 1.7 — meaning available jobs are almost double those of people looking for work.
Unemployment claims are another gauge, albeit less reliable since they’re not a direct measure of layoffs. They are counted weekly, so offer a more real-time update. Applications for jobless benefits have remained relatively level and near their pre-pandemic trend line.  

Tech firms trim bloated pandemic-era worker ranks

Overall, U.S.-based firms announced 76,835 job cuts in November, led by the technology sector, according to a report published Thursday by Challenger, Gray & Christmas. That was more than double the number from the prior month, and five times that of November 2021.
However, total job cuts in 2022 are the second-lowest on record, trailing only behind last year, according to the report. The firm started tracking data in 1993.
Layoffs among major tech firms are, in many cases, partly an unwinding of overzealous hiring during the pandemic; it’s not necessarily a harbinger of broader economic malaise that will lead to job cuts in other sectors, labor economists said.
Meta CEO Mark Zuckerberg alluded to this dynamic in a recent letter to employees explaining job cuts, which impact more than 11,000 workers.
“At the start of Covid, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth,” Zuckerberg wrote. “Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected.”

Amazon CEO Andy Jassy also said the company had “hired rapidly the last several years.” However, Jassy said the economy “remains in a challenging spot.”
The U.S. Federal Reserve is raising borrowing costs to cool the labor market and overall economy, in a bid to tame persistently high inflation. The extent to which the central bank will pump the brakes on the economy remains to be seen.

‘The job market … remains surprisingly strong’

Even though the U.S. economy at large isn’t seeing mass layoffs, tech companies are partly responding to a “real economic trend,” Zhao said.
“It’s only obvious what’s the first domino [to fall] in hindsight,” Zhao said. “I don’t think we can rule out that these layoffs aren’t the first domino.”
However, Zhao said, the job market remains strong and has continually surprised to the upside this year, suggesting there won’t necessarily be a broader contagion.
“I feel like that has been the theme of 2022 — we keep expecting the job market to slow more dramatically, and it remains surprisingly strong,” he said.

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Fewer Americans feel confident about their retirement security amid persistent high inflation and market volatility.
Even millionaires say their savings won’t cut it, according to a recent report.

A cool $1 million is not what it used to be.
There are more millionaires in the U.S. and globally than ever before, with nearly 24.5 million millionaires nationwide as of 2022, according to the latest Global Wealth Report from the Credit Suisse Research Institute. Even so, having seven figures in the bank offers less security than it used to in the face of inflation and extreme market swings.

“That mark is easier to obtain but it may not deliver what we expect,” said Dave Goodsell, executive director of the Natixis Center for Investor Insight.
These days, fewer Americans, including millionaires, feel confident about their financial standing.
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Even among high net worth individuals, 58% said they accept that they will have to keep working longer and 36% worry that retirement may not even be an option, according to the latest data from Natixis Investment Managers.
In fact, 35% of millionaires said their ability to be financially secure in retirement is “going to take a miracle,” the survey of more than 8,500 individual investors found.

Americans now expect they will need $1.25 million to retire comfortably as higher costs strain household budgets, a separate study from Northwestern Mutual found — a 20% jump from the $1.05 million respondents cited last year.

People are surprised when they do the math and realize that 4% of $1 million is only $40,000 yearly.

Dave Goodsell
executive director of the Natixis Center for Investor Insight

“A million may seem like a lot, but many people are surprised when they do the math and realize that 4% of $1 million is only $40,000 yearly,” Goodsell said. “This is usually quite a bit less than these individuals are likely used to living on.”
The 4% rule is a popular guideline for retirees to determine how much money they can live on each year without fear of running out later.
However, given current market expectations, the 4% rule “may no longer be feasible,” researchers at Morningstar wrote in a recent paper.

Retirement rules of thumb are ‘outdated’

“A lot of the rules of thumb we’ve been using are outdated,” Goodsell said. 
At the same time, the average 401(k) balance is now down 23% from a year ago to $97,200, according to Fidelity Investments, the nation’s largest provider of 401(k) plans. 
“Maybe you have that $1 million but you’ve taken a 20% hit on it,” Goodsell said. “On top of that, prices are higher.”

Another survey from Bankrate.com also found 55% of working Americans now feel they are behind in their retirement savings amid persistent high inflation and market volatility. 
“People need to look at how much they have and take the time to do the math to see how long that will last,” Goodsell said. “The name of the game is preservation.”
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Your Health, Your Money

FA Hub
Personal Finance

Individual U.S life insurance application activity increased by 3.4% in 2021, following a record-breaking year-over-year growth of 3.9% in 2020.
The industry is still wrestling with mortality assumptions related to Covid-19, and how shifts may affect the life insurance underwriting process. 
In the meantime, consumers may see Covid questions on life insurance applications, and experts are stressing why it’s critical to answer truthfully.

Family and friends gather in San Felipe, Texas, for the Jan. 26, 2021, funeral of Gregory Blanks, 50, who died of Covid-19.
Callaghan O’Hare | Reuters

As Americans brace for the third winter of the Covid-19 pandemic, many are still grappling with ongoing related health and financial issues — including insurance battles over long Covid treatments and disability claims. 
But for the life insurance industry, experts say the long-term effects aren’t yet known.

“It’s a work in progress,” explained Michel Leonard, chief economist and data scientist at the Insurance Information Institute. “There’s not enough statistical data at this point.”
Faced with a staggering loss of life, insurance firms saw payouts soar during the pandemic.

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Here’s a look at more stories on the complexities and implications of long Covid:

U.S. life insurers paid more than $90 billion to beneficiaries in 2020, a 15.4% increase in payments compared to 2019 — the largest year-over-year jump since the 1918 influenza epidemic, according to data from the American Council of Life Insurers.  
Payouts to beneficiaries increased by nearly 11% in 2021, jumping to over $100 billion, the organization’s latest report shows.
The demand for life insurance policies also jumped as consumers rushed to protect loved ones. 

Individual U.S life insurance application activity increased by 3.4% in 2021, following a record-breaking year-over-year growth of 3.9% in 2020, according to the MIB Life Index’s 2021 annual report.

However, the life insurance industry is still wrestling with mortality changes and how these shifts may affect the underwriting process. 

There’s still ‘uncertainty’ about mortality

Stuart Silverman, principal and consulting actuary at Milliman, an actuarial and consulting firm, said the Covid-19 pandemic has affected the life insurance industry in several ways, as outlined in a paper he co-authored in June.
Two areas of consideration are “mortality assumptions,” which are projections of death rates and the “capital requirements” needed to keep life insurance providers solvent. Both can factor into the price of policy premiums, he said.
While it’s clear mortality rates have increased since the beginning of the pandemic, experts don’t know yet how factors related to Covid like preexisting conditions, compromised mental health or delayed care may affect future assumptions, according to the paper.   
“I think there is uncertainty with how this will unfold,” said Silverman, noting there’s “ongoing debate” on many of these points.

How ‘long Covid’ affects mortality assumptions

Future mortality assumptions are murky for those who may be suffering from so-called long Covid, one of the terms used to describe lingering health problems after contracting the virus.
These conditions affect an estimated 7.7 million to 23 million Americans, according to a report released by the U.S. Department of Health and Human Services on Nov. 21.
“It’s really difficult to underwrite for something that you don’t have a clear way to diagnose and define,” said Marianne Purushotham, corporate vice president and head of the Life Insurance and Marketing Research Association’s data services.

It’s going to take five to 10 years for us to fully understand what patterns we’re starting to see.

Marianne Purushotham
Corporate vice president and head of the Life Insurance and Market Research Association’s data services

Overall, the life insurance industry is in a “major data gathering stage,” Purushotham said, collecting information on all the ways Covid may be affecting mortality, including indirect effects like opioid overdoses and suicide rates.  
She said one of the “big considerations” is whether impacts will be a long-term trend, noting that companies may not want to change pricing if mortality “settles into where it was pre-Covid.” 
“It’s going to take five to 10 years for us to fully understand what patterns we’re starting to see,” Silverman added.

Applications may include Covid questions

While updates to mortality assumptions may take time, experts say life insurance applications have been quicker to change, depending on state regulations. 
Consumer advocate Brendan Bridgeland, policy director and staff attorney at the Center for Insurance Research, has noticed Covid questions appearing on life insurance applications since the beginning of the pandemic and expects more in the future. For example, some companies ask questions about your history of testing positive for the disease and if you have a current diagnosis.
“States are still coming to grips with it,” he said. “Companies have been quick to add application questions.
“But I don’t think they’ve been perfected yet,” Bridgeland added.

“While you may not see a vaccine question on a life insurance application yet, it’s more likely two to three years from now,” Bridgeland said. “I can see that on the horizon and I think that’s going to be inevitable,” he added.
“There are very big differences between the questions asked by life insurers right now,” Bridgeland said. “Some make a lot of sense and others are very vague and slightly concerning.”
With a lack of consistency across providers, he worries there’s potential for consumers to misread a question and answer it incorrectly.
If a provider finds inaccuracies, there’s a chance they will return your premiums rather than pay the death benefit to your loved ones, Bridgeland said.
To avoid mistakes, ask for clarification from an insurance broker or the provider, he said. “Just take your time, make sure you understand the questions and answer them truthfully,” Bridgeland said.

Regulatory guidance is pending

In January 2021, the Consumer Federation of America sent a letter to the National Association of Insurance Commissioners, asking the organization to adopt a model rule for life insurance underwriters who may “delay or deny coverage” to applicants who have or have had Covid-19.
Prompted by life insurance underwriting changes in Europe, the Consumer Federation of America requested that the rules be “totally transparent” and “meet standards for reasonability” for applicants who may experience Covid-related delays or denials.

“This rule is also important for current policyholders who may be considering dropping their coverage for a period to save some money to help the family get through the economic consequences of Covid-19,” the letter said. “These policyholders need to know the possible danger of such action.” 
The CFA also sent the letter to major life insurance companies, asking for them to “voluntarily make Covid underwriting rules public and reasonable.” 
While the NAIC addressed the letter during their spring 2021 meeting, the organization did not have enough information to consider supporting a model rule, a spokesperson for the National Association of Insurance Commissioners told CNBC.   More