More young people believe they'll see a U.F.O. than that they'll see their own Social Security benefits. - Mitch McConnell
Like many of you I enjoyed a backyard BBQ with neighbors over Memorial Day. As I sat listening to neighbors discuss the future of Social Security, it surprised me how much angst and confusion there is about the future of the program. Most people apparently are misinformed by the soundbites they hear about the future insolvency of the program and don't dig much deeper. While I acknowledge that the current math of when retirees begin to collect and how much they collect will not work as life spans continue to increase - I also believe that generally those who are not collecting benefits either completely discount or significantly underestimate the program.
The Facts on Social Security:
Social Security has an accumulated "savings" or Trust Fund which collects excess payroll taxes to help pay future benefits.
The Trust Fund will begin to be used in 2020 and will be depleted by 2035. Payroll taxes will only pay for 80% of promised benefits in 2035.
Social Security payroll tax is capped on the first $132,900 of income. Income above that amount is not taxed.
Can it be Saved?
Yes! The younger you are the more likely changes will be significant. Most likely changes are:
Increased Tax Rate from 12.4% (employee + employer) to 14%+
Increased FRA (Full Retirement Age) from 67 to 70
"Means Testing" - those who are most affluent will receive less in benefits
Raising the cap on social security taxes from $132,900 to some higher number or perhaps eliminating it completely
Regardless of how social security is saved or tweaked - you need to take action to secure your own retirement cash flow by saving more now, spending less, and planning to work longer than today's generation of retirees. Call me if you need to see if you are currently on the path to retire comfortably at the age you desire.