According to the annual accounts for 2020 report from the Board of Directors of the Federal Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund, Social Security the program’s reserves will be fully depleted in just thirteen years. Annual taxes will only cover about 76 percent of the benefits each year thereafter.
“For many retired adults, such cuts in benefits would represent a major economic hit,” GOBankingRates.com writes and adds that government data indicates that Social Security provides about half of income for 50 percent of older married couples and 70 percent of older singles.
This is obviously worrying news for millions of retirees and aging Americans who rely on these benefits to help them financially in their golden years. In fact, it seems that the concern is already seeping in. According to Nationwide Eighth Annual Social Security Consumer Surveyconducted by Harris Poll on behalf of the Nationwide Retirement Institute, more than 70 percent of adults actually believe that the Social Security program will eventually run out.
According to GOBankingRates.com, some experts already anticipate that Congress will step in before 2035 to prevent such huge cuts in social security benefits. But the concern is still real.
“The consequences of that event would be more than traumatic for anyone in the country,” said Joseph E. Roseman Jr., a social security expert and retirement planner at Retirement Capital Planners. told the site for personal finance. “You have a national disaster on your hands,” he continued.
Similar feelings were shared by AARPwho noted that “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 from FICA (Federal Insurance Contributions Act) and SECA (Self-Employed Contributions Act) largely covers the benefits that go out,” the group continues.
“Social security faces financing challenges … [but] to avoid this result, Congress would take steps to strengthen social security finances, as it did in 1983, the last time the program almost used up its reserves. The measures then included raising the full retirement age, increasing the payroll tax rate and introducing an income tax on benefits, ”it concludes.
Roseman added that the solution to Social Security’s funding problems is fairly straightforward, but as is usually the case, it will not be easy to get Congress to initiate the necessary changes.
“No one wants to compromise,” he said.
To be on the safe side, Roseman goes on to tell his clients that social security services should not be their only source of pension income.
“I would never advise anyone to live on social security alone,” he concluded.
Ethen Kim Lieser is a state-based finance and technical editor in Washington who has held positions at Google, The Korea Herald, Lincoln Journal Star, AsianWeek and Arirang TV. Follow or contact him at LinkedIn.