“Should I count on Social Security in my retirement plan” is one of the most common questions I am asked (almost daily) as a financial Planner. This is a great question, and it seems that all Americans are worried about this topic. Although the media likes to make a big deal out of this subject (as it gets clicks), the truth is that the situation isn’t as dire as the media likes to make it out to be, and the fix may be easier than most people realize.
Fixing the Social Security trust fund problem involves addressing the projected shortfall in the program’s funding. By 2037 (or sooner, depending on economic factors), the trust fund is expected to be depleted, at which point Social Security will only be able to pay about 76% of promised benefits through incoming payroll taxes. Here are some potential solutions, each with its pros and cons:
It is likely that the combination approach is what will eventually happen. Unfortunately, because all solutions do have negative consequences politically (no politician wants to be the one to raise taxes or take away benefits), it is likely that this crisis won’t be dealt with and averted until the last minute.
I believe it is safe to assume that Social Security will be there for Americans as they enter retirement, and that the system will be reformed in time to keep current benefit levels in place.
If you would like to discuss this issue or see how it fits into your overall retirement income plan, please reach out.
Sources
- https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html
- https://www.irs.gov/taxtopics/tc751#:~:text=The%20current%20tax%20rate%20for,employee%2C%20or%202.9%25%20total.
- https://www.ssa.gov/faqs/en/questions/KA-02387.html#:~:text=In%202025%2C%20the%20maximum%20amount,tax%20on%20all%20your%20earnings.
- https://www.ssa.gov/pubs/EN-05-10035.pdf
