With presidential candidates out stumping their platforms, you’ve probably noticed Social Security back in the news. As the candidates unveil their visions for America, we are learning more about their positions on – among other things – Social Security.
So what better time to revisit a question I’m frequently asked: “Will Social Security be around when I retire?”
Finding a clear answer is difficult. If you search online, you’ll find everything from optimistic reassurance to frightening conspiracies. But let’s look at the facts here.
As you probably know, Social Security benefits are largely funded by contributions from your payroll taxes. Other primary sources of funding come from taxes collected on those benefits, and from interest earned on the fund’s reserves.
Right now, that fund is valued at $2.79 trillion. That’s a lot of money. And even with expansions in benefits, the Board of Social Security Trustees reported its income should continue netting surpluses through 2019.
It’s true… the Board expects benefits payments to begin outstripping income around 2020. This doesn’t mean the fund will vanish overnight. In fact, the Board predicts full payment of all benefits through 2035.
So, we have roughly 20 years before the Social Security fund is depleted.
I know what you’re thinking… You keep telling me it’s all good, Ryan, and then you introduce a larger problem.
It may appear dire from the surface, but it really isn’t as bad as many have made it out to be. In fact, I don’t think Social Security is going anywhere. For starters, too many retired and disabled Americans depend on these benefits for their incomes.
Moreover, the Board claims that even with the Social Security fund empty in 2035, it will still generate enough income to pay 79% of all benefits.
Assuming these projections are correct, the question becomes: how does Social Security fund 100% of benefits owed?
Well, the Board’s findings do not consider changes to our current model. And many experts expect Congress to enact changes that will preserve the fund. Proposals to adjust payroll taxes, raise the full retirement age, and means test benefits – for examples – are currently being tossed around as possible solutions.
So, is Social Security going to be around when you retire?
My advice, of course, is to decrease your dependency on Social Security as much as possible. I mean, we never really know anything for certain.
Yes, there are problems with Social Security, but I don’t think it’s going anywhere.
Social Security remains an important issue. Even if the fund is allowed to deplete in 2035, which I doubt, Social Security could continue to honor benefits by bolstering its income through a variety of legislative measures.
But the best hedge against uncertainty is preparedness. Make sure that your retirement income plan addresses all possible contingencies.