Although it's unlikely that Congress will let the system go bankrupt, it's likely that belt-tightening changes will occur, including a longer waiting time until you qualify for full benefits and smaller benefits when you do. It is best for individuals to secure other retirement savings and not plan to rely on Social Security benefits as the chief source of their nest egg.
That's not a good idea now and won't get any better in the future. Social Security Administration. Department of Health and Human Services.
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I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Part Of. The Future of Social Security. Retirement Planning Social Security. Table of Contents Expand. Who Will Be Affected the Most? Not Enough for Retirement. Anti-Social Security Retirement Plan. The Bottom Line. Key Takeaways Social Security does not now—and is unlikely in the future to—provide enough income for a comfortable retirement.
If Social Security is reworked by Congress to extend its life, younger workers and high-income earners will likely be the ones to pay for it. You should start saving for your retirement as early as possible by contributing to retirement accounts such as an IRA or k.
If no changes are made before the fund runs out, the most likely result will be a reduction in the benefits that are paid out.
With the potential for benefits to be reduced, some retirees may be tempted to apply for their benefits early to receive as much as they can before the fund runs out. To avoid benefit reductions, congress may vote to increase the Social Security taxes charged on employee wages. If the increase were put in place immediately, the employee portion of the tax would need to increase from 6. Another proposal in wage taxes that has become popular in recent years is an additional tax on high earners.
Rather than increasing the social security tax of 6. Even if the fund does not run out, the full retirement age needed to receive your full Social Security benefit is likely to go up in the future as life expectancies increase.
Since the Social Security program was first started the average life expectancy has increased 7 years and yet the full age retirement for Social Security has only increased 2 years. Retirees receiving Social Security benefits typically see their checks increase slightly most years to keep pace with inflation. These cost-of-living adjustments — or COLAs — are based on the consumer price index. After no cost-of-living adjustment in , the last few years saw a 0.
To keep the Social Security trust funds solvent, there could be changes to cost-of-living adjustments, Roseman said. But, people born after might see a reduced COLA, he said. If that happens, benefit checks will not keep pace with inflation. People who rely heavily on Social Security might have to find ways to reduce spending to make ends meet. As the past few years have shown, inflation adjustments to Social Security benefits can be small or nonexistent.
Low cost-of-living adjustments could make it very hard for people living on fixed incomes to pay their expenses in places where housing and rent costs are rising each year. Plus, seniors spend more than younger people on healthcare costs, which tend to rise faster than the cost of inflation. Should the Social Security reserves run out in , benefit cuts could take various forms.
The simplest cut would be an equal one across the board. Another option would be to cut benefits differently based on income. Read More. Learn how to maximize your Social Security benefits.
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