Investing For Your Security

Social Security reform, market fluctuations, and inflationary pressures mean you've got to take an active role in securing your finances. Our expert panel of money managers tells you what to do with your money now.

and their fees are based on the amount of assets under management. I would make sure I held a significant percentage of my portfolio in those companies.

More long term than that, we have a major issue: In 2018, the so-called Social Security fund goes negative, with more money going out than coming in. We’re going to have to borrow money to make up that shortfall. That means taxes are going to be raised and benefits are going to be cut for at least some part of the population.

Brian Jeffries: To me, Bush’s plan is akin to what we are seeing with a lot of public funds: the full transfer to defined contribution plans from defined benefit plans. There’s a lot of emphasis going into education, and that’s going to be an important aspect of his plan—to educate the participants about their options and some of the basic strategies of asset allocation and how to stick to a strategy.

How will it affect the market? There is going to be a great supply of money flying into the market, so you will probably see an initial pop. But everything comes back to the norm, so I would caution against investing for just the short term to get those market pops. You want to look for strong, solid companies, not market timing.

Ted Parrish: Consumers and investors should treat [these accounts] as a supplement to their current allocations. They should still max out their 401(k), or at least up their contributions to the level their company is matching, and contribute to their Roth IRA each year. Invest in high-quality, diversified companies and bonds.

Michael Ray: I probably look at this differently than most people. I don’t believe that Social Security is all that big of a problem. Even when we start to experience a funding gap in 2017 or 2018, it’s only because the number of workers—the Generation X and Y workers—won’t be able to cover the number of retirees in the baby boom generation. But, there are multiple solutions that could possibly fix the problem. As far as the shortfall goes, we would still be able to cover approximately 75% of the current level of payouts with no change to the system. So, when people say the system is going bankrupt, that’s actually not true. It’s just that you won’t be able to receive the same level payments that you receive currently.

BE: A lot of people think that Social Security is going to be there for them in retirement. How should people factor it into their overall plans for retirement and investing?

Ray: I don’t think anybody looks to Social Security for 100% of their retirement income. With the proliferation of 401(k)s, 403(b)s, Roth IRAs, and other ways to save for retirement, if people take the view that Social Security is only part of what they are going to need and they save on the other part, they shouldn’t really have any problems. Given that the savings rate in America is fairly low, and

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