{"id":28410,"date":"2023-10-20T20:46:18","date_gmt":"2023-10-20T20:46:18","guid":{"rendered":"https:\/\/microloannexus.com\/personal-finance\/whats-going-to-happen-to-social-security\/"},"modified":"2023-10-20T20:46:20","modified_gmt":"2023-10-20T20:46:20","slug":"whats-going-to-happen-to-social-security","status":"publish","type":"post","link":"https:\/\/microloannexus.com\/?p=28410","title":{"rendered":"What\u2019s Going To Happen To Social Security?"},"content":{"rendered":"
\n

There\u2019s been a lot of talk lately about the financial status of Social Security and the likelihood of future reductions in scheduled benefits. While concern about the financial health of the program is warranted, neither I nor my clients are losing sleep over the problem. Frankly, I\u2019m optimistic the government will implement a solution that doesn\u2019t involve a significant cut in benefits, but I don\u2019t expect anything to happen anytime soon. I wouldn\u2019t be surprised if legislation isn\u2019t passed until the 2030s and only then to avert a crisis. In the meantime, we can explore what\u2019s ailing this important entitlement program and what options exist for reform.<\/p>\n

What\u2019s the problem?<\/strong><\/p>\n

Social Security was introduced in the 1930s when the ratio of workers to beneficiaries was 45 to 1. The ratio has fallen to 3 to 1 due to population aging and is projected to drop to 2 to 1 by 2034. At that point, the scheduled benefit levels would be unsustainable, and the system could afford to pay recipients only 80% of the scheduled amount.<\/p>\n

Contrary to popular belief, the Social Security taxes you\u2019ve paid aren\u2019t stashed in a jar with your name on it. There\u2019s no personal savings account.<\/p>\n

It\u2019s a pay-as-you-go system. The Social Security Administration uses the FICA taxes it collects from current workers to pay current beneficiaries. If you\u2019re collecting retirement benefits, your check is being funded by the younger generation. Money that goes in comes out immediately, which is why the ratio between workers and beneficiaries is so important to the financial stability of the system.<\/p>\n

What solutions exist?<\/strong><\/p>\n

Benefit reductions are only one option and a painful one at that. Several other possible solutions exist that are far more palatable. For example, the government could raise the maximum wage that\u2019s subject to Social Security taxes. For 2023, the wage base limit is $160,200. Workers making $100,000 pay Social Security taxes on all their income, but those earning $200,000 have approximately $39,800 that\u2019s excluded. There\u2019s plenty of room here to raise the maximum wage base or even eliminate it.<\/p>\n

Another option is altering the age range for Social Security benefits. The earliest age to claim is 62, and the latest is 70. Full retirement age was originally age 65, but over time, it\u2019s been raised to age 66 and 2 months or age 67 depending on birth year. Pushing up the full retirement age even further would be a way to cut benefits without requiring an across-the-board reduction. That\u2019s because a great many workers would still retire at age 65 when they\u2019re eligible for Medicare and receive a lower Social Security benefit.<\/p>\n

<\/fbs-ad><\/p>\n

Another idea being considered involves means testing. Currently, your retirement benefit is based on your earnings history and the age at which you start to collect benefits. With means testing, the benefit could also be dependent on the other retirement assets you own. If you were a good saver, your Social Security benefit would be lower than someone who had less in personal savings and vice versa.<\/p>\n

I think means testing will be taken off the table quickly. It will be difficult to implement and wildly unpopular.<\/p>\n

Should I claim benefits early in case they\u2019re reduced?<\/strong><\/p>\n

Some pre-retired clients have asked me whether they should take Social Security benefits at age 62 so they can get money out of the system before benefits are lowered. My usual response is this: If benefits are reduced by 20%, then you\u2019ll wind up with 80% of a smaller benefit amount. There are more important considerations in picking a claiming strategy than a benefit reduction in 10 years which might not happen.<\/p>\n

No one has a crystal ball when it comes to the future of Social Security. You can\u2019t control what the government will do, but you can control how much you save and how carefully you craft a retirement income strategy. I\u2019m telling clients to focus their attention here and get a good night\u2019s sleep.<\/p>\n<\/div>\n

Check out\u00a0<\/span>my\u00a0website\u00a0or\u00a0some of my other work\u00a0here.\u00a0<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

There\u2019s been a lot of talk lately about the financial status of Social Security and the likelihood of future reductions in scheduled benefits. While concern about the financial health of the program is warranted, neither I nor my clients are losing sleep over the problem. Frankly, I\u2019m optimistic the government will implement a solution that<\/p>\n","protected":false},"author":1,"featured_media":28411,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[44],"tags":[],"class_list":{"0":"post-28410","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance"},"yoast_head":"\nWhat\u2019s Going To Happen To Social Security? | Micro Loan Nexus<\/title>\n<meta name=\"description\" content=\"There\u2019s been a lot of talk lately about the financial status of Social Security and the likelihood of future reductions in scheduled benefits. 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