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Dorion-Gray Capital Management® Weekly Commentary August 3, 2015

| August 06, 2015
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Wall Street reacted to negative and positive news on Friday. A wage report indicated second quarter U.S. labor costs saw the smallest increase in 33 years, producing expectations the Federal Reserve might delay raising interest rates. On the other hand, energy stocks dropped amid declines in crude oil prices and oversupply concerns. For the week, the Dow rose 0.69 percent to close at 17,690.46. The S&P gained 1.19 percent to finish at 2,103.92, and the NASDAQ climbed 0.78 percent to end the week at 5,128.28. 

On the Bucket List – 

Sixty-four percent of American adults do not have a will, an increase from the 57 percent of adults that did not have a will in 2011 (source: Rocket Lawyer, BTN Research). 

Low Cost, High Usage – 

An average working couple in America that turned 65 years old in 2015 is projected to receive $427,000 in Medicare benefits over their lifetime, more than three times the $141,000 they paid in Medicare taxes during their working years (source: Urban Institute, BTN Research). 

Twenty-Two Year Low - 

The national home ownership rate was 63.7 percent at the end of the first quarter 1993, peaked at 69.2 percent at the end of the fourth quarter 2004, and now has dropped all the way back to 63.7 percent again at the end of the first quarter 2015 (source: Census Bureau, BTN Research). 

WEEKLY FOCUS – Is the Sky Falling on Social Security? 

As Social Security approaches its 80th anniversary, a growing number of Americans are concerned about its health. According to a recent USA Today/Gallup poll, six in 10 Americans who have not retired believe they will receive no Social Security benefits when they do. Dividing the poll subjects by age revealed a disparity in responses. Among 18 to 34-year-olds, only 22 percent believed Social Security would be there for them, while 69 percent of those aged 55 and older believed it would. 

There are legitimate reasons to be concerned about the Social Security Trust Fund. People are living longer. Because they are earning more over their careers, monthly payments are higher. A lower birth rate has also had an impact. In the past, three children supported two retirees, but in the future there will only be two children in the workforce for every two retirees. 

Consequently, the Social Security Trustees’ 2015 report estimates fund reserves will be depleted in 2034 – if something isn’t changed. Even in that worst case scenario, the Trustees say benefit payments would not disappear. There would still be adequate funds coming in from current workers to pay 77 percent of scheduled benefits. 

So while there are some clouds in the sky, it’s not falling. Nonetheless, Congress needs to do something – and the sooner, the better. Possible fixes include: increasing the tax rate, raising the cap on taxable earnings, bumping up the retirement age, reducing the rate of benefits, decreasing the cost-of-living adjustment or a combination of changes. 

It should be noted that Social Security’s benefits were only designed to supplement recipients’ savings by replacing part of their earnings. The replacement rates are inversely proportional to earning levels. For example, an individual who retired in 2013 with a lifetime of medium earnings received about 42 percent of past earnings, while a retiree who had earned the maximum level received 26 percent. 

You may not be able to control how and when the government addresses projected Social Security shortfalls, but you can do your part to ensure your retirement is secure. Please feel free to call us and set up an appointment to review your portfolio and discuss your retirement goals. 

The Dorion-Gray Team 

Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. A Registered Investment Advisory Firm. Dorion-Gray Capital Management is a Registered Trademark for the 4 Tactical and 9 Strategic model portfolios currently offered by Dorion-Gray Financial Services through Securities America Advisors, Inc. Dorion-Gray Retirement Planning is a trade name of Dorion-Gray Financial Services, Inc. Dorion-Gray Financial Services, Inc. and the Securities America companies are separate, unaffiliated entities. 

© 2013. Dorion-Gray Financial Services, Inc.

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