Will Social Security be there for you?
After years of hearing about the impending insolvency of Social Security, even those approaching retirement age are worrying. What's the truth?
This post is from Tom Sightings of partner site U.S. News & World Report.
I am old enough to start Social Security, but have not applied for benefits yet. I've decided to wait a few more years to let those benefits grow, giving me more support when I get older.
Aside from the question of whether or not this is a smart move, I am struck by the cynicism I encounter when talking to people about Social Security. A lot of my contemporaries say they started receiving their benefit as soon as they could, at age 62, figuring they'd better grab it while it's still available.
Younger people in their 50s are even more anxious. As one friend told me, "I'm only 53. I have no idea when or if I will ever get any Social Security. People my age will take it ASAP if it's still there, since we've been threatened that we'll lose it."
These worries are not without justification. According to the 2013 report by the Social Security and Medicare Boards of Trustees, Social Security is already running a deficit. And largely because the number of beneficiaries will grow at a faster rate than the number of workers paying in, the Social Security trust fund will be depleted by 2033.
Most of us, throughout our careers, watched a sizable deduction come off our paychecks every two weeks. In return, we assumed Social Security would be there for us when we finally retired. We were never promised that Social Security would finance a luxurious lifestyle, but we did believe it would at least be there as a base income if things went wrong for us, or as a nice supplement to our retirement income if things went well.
Just how vulnerable is Social Security? What are the chances that a 60 year old, or a 50 year old, will see their Social Security benefits? What are the chances that our sons and daughters will get any Social Security?
Financial experts remind us that Social Security works like a low-cost, inflation-protected annuity -- just the kind of investment retirees need to provide them with a stream of income. And actually, because the program is run by the government, it is reasonably safe. Why? Because as long as the elderly continue to vote, Congress will be reluctant to renege on payouts, at least for those already eligible to receive benefits.
Yet, others have pointed out that Social Security payments are already being shaved back. The retirement age has been increased from age 65 to 66, and to 67 for people born in 1960 or later. Medicare premiums are typically deducted from Social Security payments, resulting in less Social Security take-home pay. Also, Social Security payments are taxed for people above certain income levels, and the levels are not indexed to inflation. So, while ten years ago the median beneficiary did not pay any tax on Social Security, by 2033 the median beneficiary will be taxed on half their benefits.
Also, some economists are recommending a new way for Social Security to adjust benefits for inflation, resulting in -- you guessed it -- a method that produces lower estimates of inflation and thus smaller increases in future benefits.
Putting aside our varying opinions about what we feel should happen, what is most likely to happen to Social Security?
Social Security benefits will be there for future retirees, as long as the elderly continue to vote. Remember when President George W. Bush tried to sell a plan in 2005 to replace Social Security with a voluntary retirement scheme? The idea never got out of the starting gate. It seems pretty clear that Social Security will be around, in something close to its present form, at least for anyone age 50 or over.
However, there are plenty of economists and government officials who want to chip away at Social Security payments, especially when money starts flowing out as baby boomers retire. Officials will do it quietly, hoping that retirees won't notice too much, but they will trim where they can. And they'll likely make more dramatic cuts for future beneficiaries, because as time goes on the financial pressure will increase and younger people don't vote as much.
Social Security will be with us for the foreseeable future, maybe even for workers now in their 20s and 30s. But over time the benefits will slowly become a smaller part of the retirement picture. Social Security will probably be there as bare-bones support for retirees with little or no other income, and as a less-significant supplement for people who have other retirement resources.
More from U.S. News & World Report:
- The most popular ages to claim Social Security
- 12 surprising facts about boomer retirement
- 12 ways to increase your Social Security payments
I'm already getting mine...paid into SS for 40 years...
Started drawing it as soon as I could at 62...
If the government and politicians would stop taking OUR money and replacing it with a IOU note..
it would last longer...Have lost ALL Trust in government..THEY LIE.! Starting with oblamo on down..
The government "borrowed" the money. Borrow means to pay back. When you don't pay it back it's called Grand Larceny and they should be prosecuted, but they are safe in their little home called Congress. The people SHOULD speak out and get rid of the whole bunch.
"Financial experts remind us that Social Security works like a low-cost, inflation-protected annuity" ... On the other side of the coin - an annuity will pay out if the payer stays in business. Just how low-cost is paying in and receiving nothing? Isn't that the definition of divide by zero? Not a good situation.
I'm sure it will be there in some form, but I'm saving as if it will not be there - be dam*ed if I'll leave myself exposed to the whims of politicians if I can help it. Next time they want to borrow - have them subject themselves to open market health benefit plans like the rest of us sorry b*stards instead of their current platinum plan - that ought to save tax payers a chunk.
Here is an easy fix - remove the earnings cap so that everyone pays in at the same percentage.
"For 2012, the maximum amount of taxable earnings was $110,100. In 2013, the maximum amount of taxable earnings is $113,700."
"Employees — the Social Security tax rate is 6.2 percent on income under $113,700 through the end of 2013. The Medicare tax rate is 1.45 percent of all income;
Imagine how much more solvent the fund would be if we all paid into the fund based on our total earnings. Those in congress and the senate would never remove the earnings cap though because they would have to pay a bit more since most (if not all) congressmen and senators earn in excess of the limit.
Still too many maybe's. One thing is for sure, paychecks will be taxed until the day it is dissolved. If you are 50, it will not be much and you know it will be means tested anyway. Many reasons I feel this way but with the current median wage, job participation rate, income SS cap, disability rates; no one predicted this spend versus income of SS. We should have known about the number of folks eligible, but sometimes real math is not applied. Not to mention all the politics hands in the cookie jar.
Just a supplement anyway.
Stop all of the programs that hands out free money for not working......put them to work and make them earn the money.
Let's be real the reason social security has a deficit is because the federal government borrowed that money and are unable to pay it back if social security called in those loans we would cause a financial crisis. For years the government has used that money to shore up failing plans and pet projects of the idiots that we have elected. The people in America does not understand the power they have. Why continue to elect people that does not have your best interest at heart. Whether they or Democrat or Republican you send their asses packing.
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