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Is the Social Security Sky Falling?

Is the Social Security Sky Falling?

We’ve been hearing that the Social Security system in the US is going to run out of money for decades. There was panic in the ’90’s and ’00’s, when people believed the whole system would collapse when the Baby Boomers began collecting their benefits. That happened in 2011 and is now well underway, with retirees collecting their earnings, as planned.

So is the concern unfounded? Are your benefits in peril? Join Matt Robison and I this week as we unravel the complexities of the social security system and give you reassuring information for your retirement planning.

What’s the fuss about Social Security?

Many headlines suggest that Social Security is going to run out of money within the next decade. It’s not a new fear. Similar headlines inked the pages of newspapers in the 1990’s as well. So what is all the fuss about? 

Well, first, the political implications can’t be ignored, especially in an election year. Social Security is a major political issue that has historically impacted presidential campaigns and congressional actions. Introduced after the Great Depression, Social Security significantly reduced poverty rates among seniors. That continues to be true, even today. Without Social Security, 23 million more Americans would be below the poverty line.

So how does Social Security Work?

Social security is based on a symbiotic relationship of contribution and distribution: workers pay into the system through taxes, and current retirees receive benefits from these funds. When it was introduced in 1940, the ratio of workers to retirees paying into and drawing from Social Security was 42:1. Today, that number sits at roughly 3:1 and it is expected to become 2:1 by 2050. 

You can see why some people would panic, right? Take a deep breath and relax in the knowledge that even if the Social Security Trust Fund were depleted, 70-80% of benefits could still be paid out from current contributions. Plus, there are steps being taken to increase the payout capabilities. Members of Congress (?) Are working on initiatives like raising the percentage of income subject to Social Security taxes or increasing the cap on taxable income,  gradually increasing the age at which individuals can claim full benefits, and tweaking the benefit calculation formulas to ensure long-term sustainability.

Planning for your Social Security Benefits

As you can see, Social Security should still be considered a significant part of your retirement planning…just not all of it. Start by checking your benefits here. Statements are no longer automatically delivered so most people don’t have any idea what they are currently entitled to collect. Pay attention to policy discussions and changes regarding Social Security to better plan for your retirement.

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Is the Social Security Sky Falling?

Episode 146 •

17th June 2024