Will Social Security Be Around When I Retire?
The trust fund that pays Social Security retirement benefits may run out three months earlier than expected. This new information raises two important questions: How long will Social Security last? And will Social Security still be around when you retire?
In this week’s Money Wisdom Question Series, Heath Grossman, CFP® explores where we are, how we got there, and what to do now.
How Social Security is Funded
Social Security is primarily funded through payroll taxes, also known as FICA taxes, by employers and employees. This money then goes into the Social Security Trust Fund which pays out monthly benefits. However, unless Congress acts, Social Security will likely pay only 78% of benefits starting in late 2032.
Why Social Security’s Future is at Stake
A growing disparity exists between workers paying into Social Security and retirees receiving benefits. Many Baby Boomers are of retirement age, meaning a significant portion of the population is now claiming benefits. People are also living longer lives and continuing to collect Social Security for longer periods.
Together, these factors contribute to a depleted trust fund. With a smaller share of the population left to support the system, Social Security faces an uncertain future.
What to Consider Going Forward
As we debate the best way to restore Social Security’s solvency, it’s important to know how this could affect you. If you are retired or approaching retirement, Social Security will likely be there for you. But to ensure you’re on track to meeting your income goals, you need a retirement income plan. Your Social Security claiming strategy is a key component of that plan.
If you are younger or decades away from retirement, this does not mean you should not count on Social Security. However, it does underscore the importance of funding your own retirement. That could mean saving in individual retirement accounts, employer-sponsored plans, or other vehicles.
The bottom line is that you should not rely on Social Security as your only retirement income. This doesn’t mean feeling alarmed but simply being aware of the current circumstances as you plan for the future.
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Social Security Simplified
Understanding Social Security doesn’t have to be complicated. This booklet distills the program’s complexities into clear, straightforward terms, equipping you with the knowledge to make informed decisions throughout your retirement journey.
