Rising Costs, Roth IRAs, and Social Security Expectations
With inflationary pressures and economic uncertainty this year, building a buffer for rising costs may be wise. To prepare for a potential price surge, we recommend increasing projected living expenses this year and next. For those feeling the strain of higher costs, now is a good time to review spending plans.
Beyond immediate pricing concerns, two notable trends are shaping the longer-term financial landscape, particularly for younger investors. First, more people under 40 prioritize long-term savings, leading to a surge in IRA and Roth IRA adoption. Second, the shifting landscape of Social Security is prompting more questions about its long-term stability.
The numbers tell a compelling story. Between 2016 and 2022, the percentage of workers under 40 contributing to IRAs and Roth IRAs jumped from 28% to 41%. So why are Millennials and Gen Z flocking to Roth accounts? Many believe their tax rates will be higher in the future and want to lock in today’s rates. Others are looking for more control over their financial future, especially with concerns about the national debt, deficits, and the long-term funding of Social Security and Medicare.
Adding to these concerns, the Social Security Administration is planning significant staffing cuts and regional office closures. These actions are helping to shift public perception of Social Security’s reliability. More people recognize that while Social Security will likely remain in some form, its future benefits may look very different.
The growing uncertainty in the current market and economic environment and concerns around Social Security make now an ideal time to plan practically. Regular Roth contributions can help build tax-free retirement assets, providing flexibility and security in the years ahead.
For those under 50, it may be worth reviewing scenarios in your wealth plan that reduce Social Security benefits by fifty percent and another to zero. Exploring ways to lock in today’s tax rates—such as through Roth IRA contributions or even a mega backdoor Roth strategy—can help create a more resilient financial future.
With these changes in motion, now is a good time to have meaningful conversations about long-term planning. Proactively addressing these concerns reinforces a strong, forward-thinking financial strategy…one that isn’t just reacting to change but preparing for it.
Please reach out to your Wealth Manager with questions.
Weekly Commentary
Wealth Planning Commentary – March 31, 2025
Mallon FitzPatrick
Rising Costs, Roth IRAs, and Social Security Expectations
With inflationary pressures and economic uncertainty this year, building a buffer for rising costs may be wise. To prepare for a potential price surge, we recommend increasing projected living expenses this year and next. For those feeling the strain of higher costs, now is a good time to review spending plans.
Beyond immediate pricing concerns, two notable trends are shaping the longer-term financial landscape, particularly for younger investors. First, more people under 40 prioritize long-term savings, leading to a surge in IRA and Roth IRA adoption. Second, the shifting landscape of Social Security is prompting more questions about its long-term stability.
The numbers tell a compelling story. Between 2016 and 2022, the percentage of workers under 40 contributing to IRAs and Roth IRAs jumped from 28% to 41%. So why are Millennials and Gen Z flocking to Roth accounts? Many believe their tax rates will be higher in the future and want to lock in today’s rates. Others are looking for more control over their financial future, especially with concerns about the national debt, deficits, and the long-term funding of Social Security and Medicare.
Adding to these concerns, the Social Security Administration is planning significant staffing cuts and regional office closures. These actions are helping to shift public perception of Social Security’s reliability. More people recognize that while Social Security will likely remain in some form, its future benefits may look very different.
The growing uncertainty in the current market and economic environment and concerns around Social Security make now an ideal time to plan practically. Regular Roth contributions can help build tax-free retirement assets, providing flexibility and security in the years ahead.
For those under 50, it may be worth reviewing scenarios in your wealth plan that reduce Social Security benefits by fifty percent and another to zero. Exploring ways to lock in today’s tax rates—such as through Roth IRA contributions or even a mega backdoor Roth strategy—can help create a more resilient financial future.
With these changes in motion, now is a good time to have meaningful conversations about long-term planning. Proactively addressing these concerns reinforces a strong, forward-thinking financial strategy…one that isn’t just reacting to change but preparing for it.
Please reach out to your Wealth Manager with questions.
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