There are certain insecurities over Social Security payments due to a shortfall in the trust fund. If the congress fails to address this loophole, your social security benefits will be reduced drastically in the future. The Social Security trust fund is expected to run out of money by 2034 with beneficiaries receiving only 77% of their entitled benefits. Many individuals across America are affected, especially retired American couples who depend a lot on Social Security for their earnings.
How could retired couples lose almost $1 Million?
For a retired couple, Social Security benefits are a significant part of their financial security. The current average benefit for a retired couple is around $3,000 per month. If Congress does not act to fix the trust fund’s deficit, this amount could be cut by 23%. Over a 20-year retirement period, this could add up to nearly $1 million in lost benefits. This loss would severely impact the standard of living for many couples, especially those who depend on Social Security as their primary income source.
What are the proposed solutions?
There are a lot of solutions that experts have proposed in a bid to address the trust fund deficit. One of the suggested solution is raising the payroll tax that funds social security. At the moment, the payroll tax is based on a particular income level, meaning, high earners only get to pay a portion of their income. If this criteria seize to exist, more money will be in the trust fund.
Experts also suggest raising the retirement age. However, there’s a bit of controversy and discrepancies with this suggestion as some people believe that it will be a burden especially to workers in physically demanding Jobs who may find it difficult to work later, when there are more advanced in age.
Why is it urgent for congress to act?
The Social Security Trust Fund is projected to finish in the next decade, discussions on funding have been ongoing in Congress but the need has heightened. The Congress has considered various reforms, but in practice, there have not been large – scale changes for some time. As the year 2034 approaches, the tackling of the issue begins to accumulate more pressure.
In the event that Congress is unable to act in time, retirees in every corner of the nation will suffer the consequences. Reduced payments would impact not just those already living through retirement, but future retirees as well, who might have to start planning their savings and financial affairs differently. The longer Congress waits, the more complicated the solution will be, which will probably mean more drastic steps taken in the future.
How can you prepare for potential social security cuts?
For you to prepare for a possible cut in social security payment, here is what you need to do:
- Diversify your retirement income sources by investing in retirement accounts like a 401(k) or IRA.
- Building a personal savings cushion can also help buffer the impact of potential Social Security cuts.
- Staying informed about legislative changes and understanding your Social Security benefits can help you make more informed financial decisions as you approach retirement.
