It is true – the Social Security Trust Fund is vanishing. There is no doubt that the core problem is an aging American society that outnumbers the workers necessary to support their future benefits. However, many believe that the actual demise of Social Security is a myth and, even though funds are depleting, it will not disappear. The argument is that allowing Social Security’s two trust funds to go dry would create chaos and affect retirees, as well as widows, children whose parents have died and the disabled. The demise of our social wellness system to care for them would be unacceptable to Americans.
The general consensus seems to be that even though the program has issues, Social Security is here to stay. If Congress does nothing to Social Security, benefits will only be paid out on the taxes coming in and eligible Americans will have to receive less in benefits. But, here are four more promising proposals out there right now.
- Increase Payroll Taxes – As the program is structured now, both you and your employer contribute payroll taxes to Social Security. If you are self-employed, you pay both contributions yourself. This option is pretty straight forward: more payroll taxes in will allow more money to fund SS benefits.
- Increase Full Retirement Age – Presently the full retirement age for those born after 1960 is 67 and the earliest you can claim SS benefits is age 62. Pushing back this full retirement age would save funds by decreasing the length of time that benefits have to be paid out. It would also reduce benefit dollars paid out to those who retire early.
- Increase Income Level Subject to Social Security Taxes – Right now, just the first $137,700 of earned income is taxed for SS, but if that amount was increased, it could help extend the SS fund. This would most likely affect higher incomes.
- Decrease Taxes on Social Security Income – Ultimately, we all live on “take-home pay”, so if retirees owe fewer taxes on their SS benefits, they just might be able to handle a small reduction in gross benefits.
There are options to preserve Social Security benefits, but we will probably have to wait until the deadline before we see any legislative action. What do you need to do to protect your retirement? Social Security was never meant to fully fund retirement anyway, so you need to take charge of your financial security. You need to commit to saving consistently and invest those savings wisely. As fee-only Certified Financial Planner™ professionals, we’re here to help you gain confidence in pursuing appropriate strategies for planning to achieve your dreams. Then Social Security becomes a supplement to YOUR plan and changes in Social Security benefits will not shipwreck your dreams.
Have a great weekend!
Sources:
https://www.forbes.com/sites/catherineschnaubelt/2018/05/30/social-security-past-present-and-future
https://www.forbes.com/sites/davidrae/2020/08/11/ways-to-save-social-security-now