In 2023, an average of almost 67 million Americans per month will receive a Social Security benefit, totaling over one trillion dollars in benefits paid during the year. However, a recent poll of people under age 60 found that 70% believe the retirement program is going bust.
“Social Security is not going bankrupt.”
There are long-term financing problems that can be dealt with displayed in the information to assist in understanding these Myths vs. Facts.
Working Americans pay 6.2% of their income, up to $142,800, to fund Social Security. Their employers match it. For the last 40 years, the program has intentionally collected more than it needed depositing the excess in trust funds to help fund the retirement of millions of Baby Boomers.
“Over the next few years, those trust funds are expected to run dry, that excess reserve, around 2034″. At that point, there would still be enough of ongoing payroll taxes to pay about 75%, 80% of promised benefits.”
The Social Security Administration (SSA) said changing demographics is part of the problem. “In 1940, the life expectancy of a 65-year-old was almost 14 years; today, it is just over 20 years. By 2035, the number of Americans 65 and older will increase from approximately 56 million today to over 78 million.” As the U.S. population ages, the number of working Americans supporting retired Americans will decrease. “There are currently 2.8 workers for each Social Security beneficiary. By 2035, there will be 2.3 covered workers for each beneficiary,” according to the SSA. “No one wants to live with a 20% or 25% cut in their Social Security benefits.”
Social Security is the primary source of income for a majority of senior citizens. “It’s imperative that we think about this not just as a Social Security issue but a retirement security issue.” However, a warning benefit will have to be reduced, “if Congress doesn’t fix it and we have to rely solely on the payroll tax revenue coming in.”
Please send letters to Congress to fix the problem now as it did 40 years ago. “If we look back to the last time Congress made major changes, in 1983, they did a combination of things. First, they gradually increased the full retirement age from what was then 65 and will eventually become 67. There’s talk that perhaps the age should do that even further to 69 or 70 but don’t panic. We’re talking about today’s 2-year-olds. They’ll get used to it.”
Congress could have prevented the pending trust fund shortfall had it raised or eliminated the $142,800 payroll tax income cap when Social Security actuaries first sounded alarm bells. “If we had done that ten years ago, that would have put Social Security back on 75 years solvency”.
Doing that now would help but fall short. “This is the cost of delay. Imagine if we wait another ten years to the point of trust fund depletion before Congress decides to act; this delay is going to grow larger.” The longer Congress waits, the more likely benefits will be cut, or taxes will have to be raised.
Steps, even though this decision is personal, are establishing your account at ssa.gov. One of your most important responsibilities is protecting your investment and confidential information. Social Security takes this responsibility very seriously. SSA has a robust cybersecurity program in place to help you succeed. In addition, SSA’s security process follows federal guidelines that include additional security measures so you can be sure that you are who you say you are when you conduct online business with SSA.
2023 © FedChoice Charitable Foundation. All rights reserved. The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular individual or circumstance. This article is not intended to be a client-specific analysis or recommendation. Do not use this article as the sole basis for any financial decisions. Consider all relevant information. Information should not be considered as tax or legal advice. You should consult with your tax advisor and/or attorney regarding your individual circumstances.
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Resource List for Federal Retirement
Office of Personnel Management (OPM) Retirement Services – OPM.gov Phone → 888-767-6738 (OPM Retirement Services)