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Since 1940, Social Security has provided a modest amount of money every month to retirees from a fund that collects payroll taxes on those who are still working. But the ratio of people who are employed to people who are retired has shrunk significantly in recent generations. According to the Social Security Administration, the fund will be depleted by 2035, eliminating any reserves, meaning retiree benefits will be paid directly from incoming taxes. That won’t be enough to satisfy all obligations to retirees, and their benefits will drop by an estimated 17%.
Meanwhile, President Donald Trump’s drive to eliminate a huge chunk of the federal work force has sparked anxiety among retirees and the soon-to-be-retired. The announced cuts include a portion of those who work for the Social Security Administration. Trump’s team also wants to close dozens of Social Security field offices while tightening measures for Social Security candidates or recipients to prove their identities. Advocates for retirees say these changes could lead to massive delays for services.
IBJ personal finance columnist Peter Dunn, aka Pete the Planner, is our guest this week on the podcast to provide context and break down the issues that could have a serious impact on the tens of millions of retirees who receive Social Security. And here’s is a quick preview of Pete’s advice: If you’re planning for retirement right now, your best move is to save as if you won’t receive Social Security.
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We live in an online world. I just signed up for social security without visiting an office. It was super simple. So, it only make sense to streamline the organization to best handle future needs and how the “younger generation” will apply benefits. Is social security going away? NO. Could there be reduced benefits via means testing to those who don’t need it? Maybe.
There is no way SS will reduce benefits. There are way too many retirees who depend on SS for almost all of their income. Expect a higher retirement age to claim benefits in the future. Expect all earned income to be taxed and not just the current income up to $176k. Expect the current 6.2% SS tax to increase to 7%.
Irresponsible of Congress to continue kicking these changes down the road.
I hope you are right. You’re correct that SS can stay healthy with a change in the tax rate and/or removal of the income cap. It should not be necessary to adjust the retirement age, and doing so would be unfair to many workers in more physical jobs that are difficult to sustain already in the later 60s. As for means testing, that is a slippery slope that also ignores the fact that most people build SS into their retirement plans. Do they “need it”? If it was part of their retirement plans, they absolutely need it and they should have it, and it would be a betrayal to take it away. SS is not a Ponzi scheme, and is an incredibly efficient government program with barely any administrative overhead. We just need the wealthy to pay their fair share.
Steve D. I agree with you about increasing the minimum age to collect SS for some. Maybe this is where an income limit should come in to play to allow those below a certain benefit level to start their SS at 62 without a working penalty as if they had reached their full retirement age (67 for most). Example, if your SS benefit is less than $2000, you could collect it and continue to work without SS taking back $1 for every $2 you earned over $23,400 per year before age 67.
Perhaps, to get the full-retirement if your benefit is over $2000 you would have to wait until age 68, and to get the maximum benefit you would have to wait until age 72 instead of 70.