The Social Security system is experiencing a financial crisis and the rules may have to change. I am sure you have all heard about the challenges in general, but now there is finally a tool that looks at your individual situation to help forecast the likelihood and impact of potential Social Security reductions in the future.
How We Got Here
Watch the quick video to learn what has happened to the Social Security system overtime to see the challenges the program is currently facing today.
Overall, many Social Security recipients will be receiving benefits for a longer period of time. And, those with higher incomes (which are generally those who receive higher benefit amounts), tend to live longer on average.
At the same time, there has been a continued decline in the nation’s birth rate; that means there are fewer younger workers to support the benefits promised to older workers. In 1955, there were more than eight workers supporting each Social Security beneficiary. Now there are 2.7 workers per beneficiary.
Additionally, the country’s growing income inequality has had a negative effect on the amount of payroll taxes going into the trust funds, as wages above the payroll tax cap have grown much faster than wages under the cap.
Lastly, the recession caused by the pandemic has started to push the insolvency of the Social Security Trust Fund closer to present times, making the call for Congress to act all the more pressing.
The Concern
It is concerning to think about whether or not Social Security will be there for current and future retirees as promised. There are a lot of emotions around this subject because it is often one of the largest sources of retirement income to which all workers have paid into over the course of their careers. To hear that it may not be there as promised elicits a lot of reactions…regardless of people’s wealth or reliance on this income source for a fulfilling retirement.
Each year when the Board of Trustees releases their annual report on the status of the program, the media is catapulted into a frenzy. A lot of people don’t want to believe the hype, however, one of the many reasons the media has been so adamant about talking about this very real risk is because the government is publicly telling us this could happen on each Social Security Benefit Statement.
For years, the government has disclosed that everyone may be subject to an across-the-board reduction of their Social Security Benefits unless Congress changes the rules and they have tried to explain the situation in a number of different ways.
It is no wonder that the risk of Social Security reductions is at the top, or near the top, of concerns for a vast majority of Americans on what could derail their retirement plan success.
Possible Solutions
There are many thought leaders giving a variety of opinions on what the government may or may not do to shore up the system.
And, there are really only three ways to fix Social Security:
– Reduce expenses (cut benefits)
– Increase income (raise taxes)
– Or a combination of both, which is the most likely scenario
For many of us, this will be the second time in our lifetime that the government will need to change the rules, and the Social Security payments we were promised in retirement are facing another potential reduction.
The Social Security Risk Score
Just like any headline, most people just want to know if they will be affected by these changes or not. The Social Security Risk Score is the first tool ever to dive into your unique situation and determine how at risk you may be for Social Security reductions if the government decides to change the rules.
Through your financial advisor, you may have the opportunity to receive your personal Social Security Risk Scorecard for free. The assessment helps diagnose this important risk in retirement and how to best plan for your retirement income so it is not subject to political football in the future.
Together you will be able to walk through a full report that shows the likelihood and impact of your Social Security income risk. Think of this as a “credit report” for your risk for being affected by rule changes and how those actions would affect your retirement plans success.
The Social Security system is experiencing a financial crisis and the rules may have to change. With the Social Security Risk Score you will now have a better understanding of how this can affect you.
Kate writes about retirement benefits for retirementinsurance.org. She has a Masters Degree in Social Work (MSW). She has over a decade of experience in assisting elderly and disabled populations navigate governmental and private programs to obtain the monetary assistance they need to lead better lives. As she watched her parents begin their own retirement journeys and navigate similar systems to obtain Social Security, Medicare and other retirement benefits, she gleaned a further personal knowledge about the topic and is eager to share what she has learned with others.