Social Security Is Failing Even Faster – Here’s the Solution VIEW IN BROWSER  | BY KEITH KAPLAN
CEO, TRADESMITH |
Social Security is failing even faster than anticipated. And that’s not some exaggeration meant to scare you. The U.S. government says so itself. Last year, the Social Security Board of Trustees celebrated that it expected to run through its cash reserves by 2035 — its centennial — rather than the earlier projection of… 2034. This year, it quietly bumped Social Security’s insolvency estimate back even earlier… as soon as 2033. Assuming no change in the trend, the government projects Social Security checks will drop to 81% of what they are now. That’s also down from last year’s estimate of 83%. If that happened today, the average monthly check of $2,006 for retirees would drop to $1,625. So, Social Security is failing faster… and the planned benefit cut is steeper… than originally anticipated. That’s the impact facing over 53 million American retirees and their families. And the 36 million projected to retire in the next decade. What can the government do to fix this? Three things, none of which are great… and none of which any politician seems willing to do: - Raise income taxes. That’s out the door with the recent extension of the 2017 tax cuts. In fact, the Social Security reserves may run out even sooner because of these tax cuts.
- Raise the age when you can start to receive Social Security – probably the most viable path forward.
- Cut Social Security benefits beyond what they’re already expecting to do.
All this is to say… If you’re coming up on retirement, you should consider a “Plan B” if you don’t want to spend your golden years working. And if you’re decades away from retirement, the Plan B is more like a Plan A. The government is not coming to save you from Social Security’s collapse. Luckily, we at TradeSmith have thought through this problem. We’ve devoted our team of dozens of data scientists, software engineers, and analysts to the task of helping you make returns that outpace the market. We’ve spent tens of millions of dollars in the pursuit of this mission. Beating the market, especially in a time of high inflation, is the best possible way to build the kind of nest egg that will endure for decades. And even if you’re just getting started today, we have a plan for you to supplement the extra income you’re going to need in retirement when, not if, Social Security goes bust… Your Three-Step Backup Plan for Social Security’s Collapse Creating a backup plan for your retirement is simple in theory, but may be difficult in practice. Luckily, the hardest step is the first one. So, let’s start there. - Eliminate all high-interest-rate debt and ideally be debt-free.
Don’t sit on any short-term, high-interest-rate debt (basically, everything but your mortgage and maybe your car loan). It demolishes your monthly income… and hands your hard-earned money over to the banks for no good reason. If you have debt, especially credit-card debt, make paying it off your top priority before you move on to steps 2 and 3. I’m serious. You can’t proceed until this is done. No passive income stream or capital gains will be enough to consistently offset a credit card balance growing at a 24% annual rate. Downsize… stop relying on credit cards… and make a smart spending plan where you pay off the debt, period. - Build up your rainy-day fund.
This looks a bit different for retirees than it does for working people, but it’s just as important. You need a chunk of cash saved away for emergencies — necessary home or car repairs, unexpected medical expenses, stuff like that. This is the middle ground between the three steps for a reason. You can’t have too much debt… but you also can’t be so invested that you don’t have any cash on hand. How much emergency cash you’ll need will vary on your situation. If you’re working, three to six months of living expenses is a good bet. But if you’re already retired and looking for an estimate, just think about the most likely kind of major unexpected expense you’d face… figure out what that would cost… and then double it. This is the minimum amount of cash you need on hand. Ideally, you keep that in a high-yield savings account you can tap into at any time. - Invest in a mix of U.S. Treasurys and high-quality, dividend-paying stocks.
Now that your debt and savings are squared away, we get into the part where TradeSmith really can help: investments. To build the core of your backup plan, you need to invest in assets that generate income while you sleep. This is so important to anyone’s wealth plan, and it should be done as early in your financial journey as humanly possible. Think about Warren Buffett. Right now, he’s using his $347 billion war chest to earn about $15 billion a year in short-term Treasury bills, rolling them over and taking the proceeds month after month. He’s one of the richest people in the world and perhaps the most successful investor of all time. But he’s using the same tools you and anyone else can use to stay ahead. Treasurys should be roughly 10% to 20% of your income portfolio as a retiree, depending on your personal risk tolerance. Go for the shortest terms and the highest rates, to minimize risk and maximize returns. If you’re not a retiree, T-bills should be where your cash savings live. And as for the remainder, that’s where we start to talk about dividend-paying stocks. Dividends Are Your Retirement Lifeline Dividends are a slice of a company’s earnings, paid directly to shareholders. They’re an essential component of any retirement portfolio. After all, while Treasurys might help you stay ahead of inflation… stocks can do much better, especially when you combine capital gains with high dividends. Now, not all dividends are created equal. Many dividends, especially those with attractively high yields, are not sustainable. Even small dividends may not be, either, if the company hasn’t been paying them for long or has a volatile business model. That’s why it’s so important to focus on quality companies when you go to build a long-term dividend portfolio. Normally, this would require a lot of time doing research. But here at TradeSmith, we’ve built two incredible tools that help you manage all of this in seconds. The first is Jason Bodner’s Quantum Score. This ratings system highlights stocks with all the hallmarks of a great trade – strong earnings, revenue, and profit-margin growth alongside price strength and large-scale buying volume. The second is our Screener. With it, you can quickly screen for stocks that meet any criteria you’re looking for. In our case, we can use it to find stocks with a high Quantum Score plus dividend yields that beat inflation. (That’s currently running at 3.1%, using the latest Core CPI reading.) That takes a list of hundreds of large- and mid-cap U.S. stocks down to just 17. Here are the top 10 ranked by Quantum Score: 
All of the above stocks score about 80 on the Quantum Score, indicating a healthy combination of fundamental and technical factors. And all of them yield more than 3.1% – some even 5% and 6%. At today’s prices, their dividends represent an annual income stream that outpaces current inflation rates. With just these few parameters, we have a list of high-quality, mostly low-volatility, diversified dividend payers. That’s a great start for someone building a high-income and high-performance portfolio… or for someone who’s simply looking for new ideas. Whatever form Social Security takes 10 years from now, chances are good you don’t want to depend on it to keep you afloat through your golden years. You have to take action, and we’ll keep showing you our favorite ways to do this here in TradeSmith Daily. All the best, 
Keith Kaplan
CEO, TradeSmith P.S. The key to finding winning stocks like those is to follow the “big money”… When institutional investors from Wall Street move in with their client’s money, that can keep a stock riding high all on its own. If they move back out… that’s when Jason Bodner’s Quantum Score would wave a big, red flag. And the reason I was so excited to partner with Jason on it is because he used to be one of those institutional investors. It’s how he learned to spot their money flows in the first place. Check out my new presentation all about this partnership right here. | 
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