Don’t Fall for This Hype About Social Security

Retirement

Don’t Fall for This Hype About Social Security

Posted by Infinite Wealth Advisors, LLC
6 months ago | May 13, 2019

Sometimes, news headlines can appear more alarming than necessary. On top of that, we all hear rumors from coworkers and friends, that can be upsetting if we don’t take the time to fact check them. With Social Security being such a large and complex government program, most of us don’t know what to make of the rumors and sensational headlines that we’re hearing.

Understandably, you might believe in this common myth: Social Security won’t exist much longer, and you won’t receive benefits when you retire one day.

Fortunately, this is not true at all! But because the myth is based upon some actual facts, let’s clarify what is actually going on.

Social Security benefits are paid mostly from incoming taxes each year. In other words, the program’s budget is primarily based on Social Security taxes, not upon some imaginary “savings account” in each beneficiary’s name (another common myth).

However, taxes aren’t quite enough to cover all outgoing benefits, so the extra money needed is pulled from two trust funds: The Old-Age and Survivors Insurance and the Disability Insurance trust funds cover the budgetary gap. But because those funds are running dry, the Administration’s budget soon won’t have the funds to cover all benefits each year.

The shortfall is predicted to occur in 2035, and will amount to about a 20-30 percent gap between funds needed and funds available. At that point, Social Security will only have enough money (from incoming taxes, remember) to pay about 70-80 percent of each beneficiary’s benefits due.

That’s not exactly great news, and will certainly impact retiree budgets, but it’s not quite the same thing as benefits disappearing entirely!

But wait. That’s not exactly guaranteed to happen, either. Politicians understand how important the Social Security program is (and they also understand that retirees make up a significant percentage of their voters). Policy makers are currently exploring options to cover the budget shortfall, so that benefits won’t have to be reduced at all. Some options that have been proposed include raising taxes on workers, or raising the retirement age for Social Security. Other measures have been debated as well.

So no, we don’t foresee a future in which Social Security is extinct! But we will continue to monitor the situation, and keep you updated as changes are proposed and made.

In the meantime, continue meeting with us to plan for other forms of retirement income. If you’re never too dependent upon Social Security to fund your retirement, you’ll enjoy greater peace of mind knowing that you have planned for a stable future.

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