What’s the deal with our Social Security program?
Mel Barnes, SVP – Chief Operations Officer
Millions depend on Social Security benefits, and millions more are counting on those benefits when they reach retirement age. The problem is, the program is facing some big challenges—namely, funding.
According to the 2018 Social Security trustees’ report, the trust funds that currently hold nearly $3 trillion in reserves are expected to run out in 2034. After that, incoming revenue from payroll taxes and other sources will only be enough to cover about 77 percent of promised retirement benefits.
Why? The bottom line is that the program’s costs are outpacing its income. In 2018, Social Security’s costs were $952 billion but its non-interest income (mostly from payroll taxes) was only $911 billion. Still, there are reasons to remain positive:
Social Security is not going broke.
No one wants to see a reduction in benefits, of course, but Social Security will go on indefinitely since the program gets the bulk of its revenue from payroll taxes. As long as we have a workforce, Social Security will continue to collect and distribute money.
You can boost your benefits.
The current Social Security model is designed to replace only about 40 percent of the average worker’s pre-retirement income, so this benefit alone is probably not going to pay your senior living expenses. But you can raise your benefits significantly if you hold off on claiming benefits past your full retirement age. Waiting until you’re 70 to file for Social Security could amount to thousands in extra annual benefits. Talk to your financial advisor about this strategy.
Even if you never worked, you may still collect Social Security.
To become eligible for Social Security in retirement, you need to accumulate at least 40 lifetime credits, the dollar value of which changes from year to year. So, you have to work to get benefits, right? Not necessarily. If you are (or were) married to someone who is eligible for Social Security, you may be entitled to spousal benefits—as much as half of your spouse’s benefit at full retirement age. Again, your financial advisor can provide details.
Source: Motley Fool (https://www.fool.com/retirement/2018/11/07/3-things-that-will-make-you-feel-better-about-soci.aspx)