3 Scary Truths About the Future of Social Security

Lydia Kibet  Sun, December 22, 2024  GOBankingRates

For millions of Americans, Social Security isn’t just a paycheck. It’s a lifeline. With many reports that Social Security benefits may run out by 2035, it’s unclear what the future holds. Whether you’re already retired or still years away, you need to know these hard truths about the future of Social Security.

The Program Could Be Insolvent by 2035

What most people don’t get is that Social Security isn’t going bankrupt. It’s running a deficit, which means the program doesn’t have enough cash (coming in from upcoming payroll taxes) to fund benefits fully. For this reason, the Social Security Administration (SSA) has been pulling money from its trust funds to avoid the benefit cuts so far.

As stated by the SSA Trustees report, the current surplus will run out by 2035. However, this doesn’t mean the program will no longer pay benefits. Instead, the program will be able to pay only about 83% of the scheduled benefits. This means your monthly check could be potentially slashed by 17%.

“Policymakers can implement various Social Security reforms to rebuild this surplus, like raising the full retirement age from 66 to 70 or taxing workers on all their earnings,” said Steve Sexton, financial consultant and CEO of Sexton Advisory Group.

“Regardless of whether a surplus is achieved or not via reforms, I wouldn’t recommend leaving this up to chance, and it should motivate individuals who plan to retire in 2033 and beyond to reevaluate their retirement planning strategy. Future retirees should plan to beef up their reserves via other means of retirement income, whether through investments, real estate, part-time work or other income streams.”

According to Taylor Lee, financial advisor at Belmont Capital Advisors, “A scary truth about the future of Social Security is that people are living much longer now and drawing benefits into their 90s, whereas benefits can start as early as 62. It’s common sense that we need to raise the retirement age for Social Security, but no politician is going to do it because they’re afraid to lose votes.”

Inflation Is Eating Away at Benefits

Even if Social Security doesn’t become insolvent, it’s losing its buying power. While Congress adjusts Social Security benefits for inflation each year through the cost-of-living adjustment (COLA), it hasn’t managed to keep up with skyrocketing inflation. This means retirees are losing money each month as their bills surpass their benefits. If inflation keeps outpacing COLA, retirees will lose purchasing power on their benefits yearly.

“A recent analysis by The Senior Citizens League reported Social Security benefits have lost 20% of their buying power since 2010, which means the next generation of retirees cannot realistically depend on their Social Security check to fully support them in their golden years,” Sexton said. “Additionally, as necessities like housing, groceries and healthcare increase, retirees will struggle to afford basic needs if their Social Security benefits don’t keep pace with rising costs.”

TO READ MORE:    https://www.yahoo.com/finance/news/3-scary-truths-future-social-120059678.html