June 22, 2018
Here's the truth about Social Security being available for your retirement
It'll be available. Period. Now, you could stop reading this and move on to something a lot more fun than thinking about the solvency of the Social Security Administration.
Or, you could humor me - and yourself - by reading the rest of this to truly absorb a few key facts about Social Security and finally put to rest the endless fearmongering from people who keep shouting "
social security is on the verge of bankruptcy!" Because that statement is as untrue as it is manipulative.
Two very quick notes before we continue:
- A retired couple receiving maximum SS benefits today could receive over $60,000.00 annually, with COLA's (Cost of Living Adjustments) adding to that every year. That's not enough to live on for a comfortable retirement, but it is still a decent size chunk of income that will pay a lot of bills.
- This post could apply to everyone who reads it, but it is really aimed at those who are 55 years of age and under. In conducting my business and while roaming around in my networking and social circles, I find that many people from their 20's to their 50's think social security won't be around for them. That notion could render planning and investing decisions more uncertain.
The background: President Franklin D. Roosevelt signed the Social Security Act into law in 1935, during the Great Depression, when it was sorely needed. His quote from that moment:
Today, a hope of many years standing is in large part fulfilled. We have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age. (Source: www.SSA.gov )
The problem, unforeseen back then, was the average life expectancy of an American was 61 years of age. By today's average, about 80, that is so young. The average retirement age today is about 66 - and rising. With about 10,000 boomers retiring every day and living longer, social security benefits are being doled out to way more people and for way longer than what was originally planned for.
But the super large bulge of baby boomers passing through the Full Retirement Age hump is not the only reason for the pressure on Social Security solvency. The U.S. birthrate dropped post-baby boom from an average or 3 baby's per woman to about 2 since then; resulting in fewer people to pay into the program. Unfavorable demographics hit social security from both sides at the same time. It remains to be seen what happens to Social Security's finances when the millennials are fully employed and move into their peak earnings years, which is on the way over the next 10 years. It might not be known to everyone reading this, but the millennial generation is actually more numerous than the boomer generation.
In 1983, a fix for social security was to raise the full retirement age (FRA) to 66 for those born between 01/02/1955 and 01/01/1956 and to 67 for those born after 01/01/1956. That helped to extend the program's availability for many years.
The problem right now: From AARP - "
The latest projection has the combined Social Security trust funds that pay retirement and disability benefits running out of cash reserves by 2034."
On this, Social Security is operating with about 2.8 Trillion Dollars in surplus at the moment. But 2034 is not a hard close on paid out benefits, even though it is projected to go from surplus to deficit. How's that? Because Social Security is funded with payroll taxes, which should continue to be paid into Social Security.
Again, from AARP: "But that wouldn't leave Social Security bankrupt and unable to pay any benefits. Even if Congress does nothing to shore up the system by 2034, Social Security will be able to pay out 79 percent of promised benefits until 2090. The last time Social Security nearly depleted its reserves was in the early 1980s, when Congress shored up the program by gradually increasing the full retirement age from 65 to 67 and started to tax benefits based on income levels."
Conclusion: Congress probably won't act to shore up Social Security until the last minute if history is any guide, like in 1983, during President Reagan's first term, which was the last time Social Security was running a near-deficit. To tell citizens that they won't receive benefits in spite of paying into the system for their entire adult life is tantamount to political suicide.
In 1983, the Speaker of the House of Representatives, Tip O'Neill, famously called Social Security "the third rail" of politics. Like the third rail of electrified railway systems, stepping on it would result in electrocution, i.e. political death to a politician that would mess around with Social Security benefits.
I hope this gives you a historical perspective about Social Security and answers your question about whether or not you'll receive benefits at retirement. You could receive a lowered benefit, but you will at least receive most of what was promised. That last part is something you may not want to hear, but it is important to know.
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