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Tuesday, July 1, 2014

Social Security And The Future of Marketing

As it has for several years, the United States Social Security System remains something of a political hot potato. Columnists often refer to it as “the third rail of American politics” meaning that if you touch it, you will die politically. Few in Washington have the guts to face the problems that the system faces (possible cutting of current benefits by 2034) even though the majority of young Americans in poll after poll do not believe that it will be there for them.

Reform may consist of raising the age of when you could collect and increasing the cap on income that could be taxed by social security. Combine that with some kind of means testing (multi-millionaires would see their benefits slashed) and the system could be saved in to perpetuity.

As a marketer, I have different issues with the program. According to the Social Security System itself, the monthly program payments account for 38% of the income for U.S. adults over 65. For couples, the figure is 22% and for single persons collecting a check, Social Security is 47% of their total income.

Dig a bit deeper and the numbers get scarier--a lot scarier. The American Association of Retired Persons (AARP) via their public policy institute recently released Social Security data by state. One chart floored me--it showed the percentage of people Age 65+ who relied on Social Security for at least 90% of their income.

Tennessee was on top at 32.7% followed by Mississippi at 30.8, Arkansas at 30.7, Georgia at 30.6 and Louisiana at 29.9%. Alaska appeared to be in the best shape at 14.5%. Again, statistics sometimes lie. Every Alaskan gets an oil payment each October from their Permanent Fund. Payouts can be as high as $3,269 in 2008 and were $900 in 2013. Yet the cost of living in Alaska is somewhat higher than most of the lower 48 states. So, they appear to be wealthy but, in terms of purchasing power, clearly they are not.

Also, each day some 10,000 Americans turn 65 years old so it is a safe bet that the number of people having Social Security as 90%+ of their income will only increase.

A reader wrote to me an hour ago saying that the Dow Jones Industrial Average hit an all time high. It did and almost closed at 17,000. That is great for all of you with seven figure 401k balances and significant passive income. Yet, for the average American, whose income has been stuck adjusted for inflation for more than 30 years, the Dow’s flirting with 17,000 is a meaningless statistic.

Marketers need to take note. America is getting older. Not as old as Europe, for sure, but far older than Asia ex Japan and Latin America. Increasingly, these people 65+ are going to be struggling. Financial decisions will revolve around food, prescription medicine or rent payments. For too many people, something will have to give.  The base for many products will have to erode. Are you or your clients prepared for this?

If you would like to contact Don Cole, you may reach him at doncolemedia@gmail.com

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