Will the Economic Downturn Affect Future Social Security Benefits?

The coronavirus pandemic has affected us all in different ways, but we all have one important thing in common: Retirement, and our future Social Security benefits, concerns us all. Analysts have predicted some changes to the program in the not-so-distant future, due to the state of the economy. Here’s what you need to know…

Social Security solvency has been in question for decades. Experts have long agreed that the Social Security trust fund will be exhausted by about 2035, at which point incoming taxes will only cover about two thirds of outgoing benefits. Once the trust fund is depleted, we face some hard choices: Should we increase taxes to cover benefits, allow benefits to be cut, or something else?

This problem has loomed for quite some time now, with various solutions proposed but not yet adopted. Now, with more than 40 million Americans unemployed and a recession descending upon the economy, the situation has become more pressing. Analysts believe the trust fund will now run out of money about two years sooner than originally expected, if nothing is done to address the shortfall.

So, what does this mean for the average person planning for retirement? This all sounds upsetting, but we can also put a more positive spin on it. Now, with the shortfall arriving about two years earlier, Congress will face increasing pressure to do something about it. It could simply mean that we receive answers sooner, and we all feel better about the situation.

On the other hand, this situation is an important reminder that while we all face retirement someday, we can’t exactly count on Social Security to provide for our entire retirement income (it was never intended to, anyway). Staying involved with your own financial planning process is now more important than ever.

We will keep you updated on this situation as it progresses, but in the meantime let’s continue to discuss your retirement dreams. Together we can adopt a plan that aims toward your savings goals, regardless of what happens with Social Security.