It’s an unfortunate week to make the comparison but it is an apt one for the very reason we saw as the tragedy in Baltimore unfolded early Tuesday morning. Then, a ship appears to have temporarily lost power and control, causing it to strike the Key Bridge and doing massive damage to lives and property.
You, the client are on the larger voyage called “life.” Sometimes that voyage takes you into places you didn’t want to go such as divorce. You still run the ship and decide the destinations. But a divorce lawyer is kind of the river pilot who takes you through the often choppy and unreliable waters called divorce litigation. When my partner David Rasner passed away earlier this year one of the people who eulogized him was a former client of long, long ago, who summarized his importance in her life in much this way. As she spoke to David’s mourners she recalled vividly how much she needed and appreciated his counsel at what was then a very traumatic time.
Part of the lawyer’s job at this arduous time is to help clients see what lies ahead and how to best navigate their way out of the divorce process. For that to work, a big piece of the problem is assembling the assets that are there to divide, and trying to help assess what assets the client can call upon to get to one of life’s larger destination, e.g., retirement.
Just as occurred with the “Dali” at 1:27AM on Tuesday morning, there are today some very real concerns about a vital piece of any divorce plan. That’s social security. Almost everyone in America qualifies and, in an age when the stock market lost 50% of its value in 2008 and more recently gained 14% last year (Dow Jones index) social security remains the foundation of almost every retirement plan. You could look at your statement and see a projected sum that would be put in your bank every month. From there, you evaluated the other assets you had and figured out how they could best be invested, then harvested, to carry you to life’s finish line.
Every day is filled with some kind of blinking harbor lights in the financial world. We have Amazon, Meta, crypto, index funds, commodities and an entire retinue of experts who profess to know what’s best. In early 2020 crypto was the rage until the pandemic hit and the asset lost 20% more or less overnight. Meanwhile, a relatively quiet housing market took off in the other direction such that home prices have risen 30%.
The bigger problems we now face are not on our personal balance sheets. In the past 15 years, the national debt has tripled from $10 to $30 trillion. To pay that debt we need good old fashioned American workers/taxpayers. We have 167 million people working. But we have 50 million retired people almost all of whom are checking their electronic mailboxes monthly for their social security. That’s 15 million more retirees than we had 15 years ago. Today’s retirees at 66 can expect to collect for 20 years. That’s twice as long as it was when social security started with payments that then averaged $23 a month.
The other harrowing statistic is birth rates. They are half of what they were in 1950, about 12 per 1,000 of us. So, a big part of the problem is that we have fewer kids to pay into all of the entitlement programs we have created.
Circling back, the Republicans in Congress have flagged this as an issue. They are talking cuts in benefits but prefer to focus on raising the retirement age. That makes some sense unless you have been mining coal or engaged in other intense physical activity for 40+ years. And when we discuss cuts in social security and/or Medicare benefits many Americans don’t have much to be able to push back across the table to keep the entire ship afloat.
Regardless of which side of the political spectrum you reside on, the emerging battle over how to fund social security and Medicare is going to affect almost all of us. And for the increasingly “gray” divorce community (those over 50), they have a narrow window to adjust because their most productive years, in an economic sense, are in the rear view mirror.
As we noted in a recent post, a common client question in divorce is “Will I be ok financially?” The answer to that typically started with “You have $30,000 in social security and if we take 4% a year out of retirement for an additional $24,000 not counting the $300,000 of equity trapped in your home that you can eventually turn to cash…..” And while most of us have had some great returns in recent years on both portfolio income and home value increases, the core strength of the past, social security, is starting to look like a political “loose ball” in a highly partisan and deconstructive political atmosphere.
This is going to complicate the divorce process for seniors as we will all be less certain about what social security will reliably provide. That “insecurity” is going to make settling divorce cases more challenging and will probably make it more expensive. No one profits from a system that is financially unsound. The problem is that right now it’s not clear where Social Security reform is headed.
A recent Marketplace article on Gray Divorce: https://www.msn.com/en-us/money/other/gray-divorce-is-most-often-initiated-by-women-even-though-it-can-crush-their-finances/ar-AA1gyOe8?ocid=hpmsn&cvid=5170318d16c5468fa54f863f560c6de9&ei=92
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