Know That Social Security Money Isn’t Entirely Guaranteed
There has been growing concern about whether the Social Security program will even be around in the decades ahead.
For soon-to-be retirees—with their monthly Social Security checks rolling in—many might be dreaming about extended vacations and being able to focus solely on their hobbies or volunteer work. After forty-plus years in the workforce, they most likely deserve such a break from the day-to-day commitments of a regular work schedule.
But in recent years, there has been growing concern about whether the Social Security program will even be around in the decades ahead. In fact, according to a recent Nationwide 8th Annual Social Security Consumer Survey, it found that 71 percent of American adults actually believe that the program will eventually run out of cash.
System Failing?
If one looks at the Social Security program’s current trajectory in terms of finances, these worries are indeed somewhat rightly placed.
For example, the 2020 annual report put together by the board of trustees of the Federal Old-Age and Survivors Insurance Trust Fund and Federal Disability Insurance Trust Fund projected that Social Security’s reserves will be fully depleted by the year 2035—and that yearly taxes will cover only about 75 percent of the benefits each year after that.
If this occurs, then it would be a devastating blow to many seniors who rely on Social Security to pay for most of their needs. Recent data released by the Social Security Administration (SSA) shows that approximately 20 percent of married couples and 40 percent of singles receive at least 90 percent of their income from Social Security benefits.
“Claiming Social Security at the end of a long forty-year career is still possible, but might not pack the same punch as it did for our grandparents,” financial expert Sam Swenson wrote in an op-ed published by the Motley Fool.
“Benefits were once responsible for covering the lion’s share of costs in retirement. Based on recent projections, however, the probability of the same being true for today’s millennials seems tenuous at best. . . . There is a good chance that reduced benefits—in combination with rising inflation and taxes—will make it more difficult to sustain a lifestyle you’re happy with,” he added.
Fears Overblown?
AARP, however, recently noted that such fears of the Social Security program not being able to pay benefits is a “myth that refuses to die.”
“As long as workers and employers pay payroll taxes, Social Security will not run out of money. It’s a pay-as-you-go system: Revenue coming in from FICA (Federal Insurance Contributions Act) and SECA (Self-Employed Contributions Act) taxes largely cover the benefits going out,” according to the AARP website.
“Social Security does face funding challenges. . . . To avoid that outcome, Congress would need to take steps to shore up Social Security’s finances, as it did in 1983, the last time the program nearly depleted its reserves. The steps then included raising the full retirement age, increasing the payroll tax rate and introducing an income tax on benefits,” it continues.
Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.
Image: Reuters