One of the first things we suggest when creating a retirement financial plan is to look at your income and your expenses. For many people, a foundational source of income is Social Security. 

But if you’ve been paying attention to the news lately, you’re sure to know that Social Security may be in trouble. How much trouble is difficult to determine because it depends on the assumptions “experts” use and the point they want to make.

Whether Social Security just needs a few simple adjustments or drastic reform depends on how you look at it. Nonetheless, something needs to be done.

For those already retired or close to retirement, there is likely not too much to worry about. You should continue to get the monthly benefits you’ve planned on. But for everyone else? It’s harder to say. 

Let’s take a look at Social Security and a few facts.

The Facts

The Social Security Administration puts out facts and figures about Social Security each year. The 2019 Fast Facts & Figures report shows that 67.9 million Americans receive some kind of Social Security benefits. They get these benefits because they paid into the program while they were working. Their money helped those already retired. Those who work today also put in money – and that money pays today’s retirees. 

How much a person pays into the system depends on how much they earn. In 2019, Social Security taxes are paid on the first $132,900. The employee pays for half the tax, while the employer pays the other half. For those that are self-employed, they pay the entire portion. Then, the money collected is put into a trust fund and invested. 

How much a person gets back from Social Security also depends on how much they earned and how long they worked. The higher your wages and the longer you worked, the higher your Social Security benefit will be.

Finally, when you decide to start taking benefits will affect how much you receive. If you take it before the Social Security retirement age, which is in the process of rising to age 67, your benefit will be smaller. Always keep this in mind – if you choose to take Social Security early, your benefit will always be smaller, even when you reach full retirement age.

Trends That Affect Social Security

There are two big trends that are currently affecting the Social Security program:

  • Increasing life expectancy: People live longer, so they will receive Social Security benefits for a longer period of time.
  • Decreasing birth rate: There will be fewer young people working and paying into the system, which means there will be fewer funds for those already retired.

Unfortunately, according to the 2018 OASDI Trustees Report, Social Security already takes in less money than it gives out as benefits. This means that they are using money from the trust fund. They can continue taking money from the fund and paying out 100% of the needed benefits until 2034. At that point, the money coming in will only pay for 77% of the benefits required by retirees.

Unfortunately for future retirees, that means that you might need to plan on your benefit being 23% less than the projected numbers.

How to Fix the Problem

There is a lot of argument about the best way to fix the problem. So far, no solution has been determined. However, here are some of the ideas people have had:

  • Let individuals invest the Social Security money themselves
  • Raise the amount paid into Social Security by current workers
  • Make workers pay Social Security on wages above the current ceiling of $132,900
  • Increase the retirement age
  • Reduce benefits for future retirees
  • Create a different benefit formula
  • Calculate the cost-of-living adjustments differently

All these solutions have pros and cons. What the final answer will be is not certain.

What Can You Do?

No matter what happens with Social Security, you still have a lot of control over your financial future. Here are some things to do:

  • Save as much as you can for retirement
  • As you plan for retirement, consider different options that include full Social Security, Social Security benefits at different levels, and no Social Security at all
  • Learn what your current Social Security benefits are by using the SSA calculator or signing up for a “My Social Security” account to see your online statement.

Finally, you can begin working with a financial advisor to help you determine your income needs and create a plan to help you get where you need to be. Click here to connect with us and see how we can help you enjoy the retirement you want on the money you have.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

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