The pandemic and recession of 2020 have negatively affected the Old-Age and Survivors Insurance benefits, commonly known as Social Security retirement benefits. With fewer payroll taxes collected throughout this period due to declining workers, layoffs, decreasing working hours, and increased unemployment benefits, the fund is facing insolvency. The Social Security Administration has been spending more on benefits than bringing in from payroll deductions.
Initially designed for retired workers and survivors, the program’s funds depletion date of 2035 is now 2034. The Social Security Administration anticipates only paying between 75% to 78% of benefits to retirees and beneficiaries if Congress doesn’t act soon.
According to the Congressional Budget Office, the youngest eligible retirees claiming benefits early at age 62 starting in 2034 will receive approximately 5-6.5% less each year than those retiring at their full retirement age. However, those retiring at their full retirement age will receive around 8% less per year up to age 70.
is there a fix for social security’s problems?
The Social Security Administration is selling Treasury bonds to keep the funds afloat. However, the funds will significantly deplete in the next twelve years. Some proposed solutions from the fund’s board of trustees include:
- Increasing payroll taxes from approximately 12% to 16% to fund the Social Security program.
- Reducing or eliminating annual increases in Social Security payments.
- Raising the early retirement age from 62 to 65 and the full retirement age from 67 to 69.
- Increasing the required number of years participants have to work before they can receive Social Security benefits.
A 2021 Gallup poll found that 38 percent of U.S. adults not yet retired thought Social Security would be a significant source of their income. Today, 57 percent of retirees rely on Social Security as their primary source of income. Those retiring after 2034 will need to rely more on other retirement savings and less on their Social Security retirement benefits. Here are other ways to help ensure you’re financially prepared for retirement:
- Participate in your employer’s retirement savings plan and contribute enough to receive their match. Automate your contributions to increase each year so that you eventually maximize your retirement savings.
- Contribute to a Traditional or Roth IRA and invest in stocks, bonds, real estate, mutual funds, and other assets to help increase your retirement savings.
- Work with a financial professional to establish a financial plan or revise an existing plan and evaluate your current retirement assets.
Whether Social Security retirement benefits are available at the current levels or not, planning for your future without it is essential.
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