Hi everyone – over the past few weeks we’ve talked about:

  • Why the Social Security decision is bigger than your age
  • Why I don’t believe panic is a retirement strategy, nor do I think it’s a good strategy for claiming your Social Security.

So, let’s take a honest look at SSI’s future:

What is Social Security likely to look like 10 or 20 years from now?

If you’ve watched the news lately, you might think there are only two possibilities:

“Everything is fine or Social Security is bankrupt.”

There are demographic realities that currently determine whether Social Security faces long-term funding challenges. The latest projections continue to suggest that the retirement trust fund could be depleted in the early 2030’s if Congress makes no changes. Even then, payroll taxes would continue to fund a substantial portion of scheduled benefits rather than causing the program to disappear altogether and that is an important distinction.

The pending trust fund threat is being addressed by the Federal government. Just last year, lawmakers passed the Social Security Fairness Act, repealing the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) for millions of public-sector workers such as teachers, firefighters, and police officers. (Social Security Administration). Senators Warren and Moreno are currently working on a bill that would eliminate Social Security’s payroll tax cap (currently $184,500)

More recently, Congress enacted tax legislation that created a temporary additional tax deduction for many Americans age 65 and older. Despite campaign rhetoric,

however, it did not eliminate federal income taxes on Social Security benefits. (Stonewood Financial)

Social Security continues to evolve, and I believe a number of changes are likely. Policy discussions have centered around a fairly familiar list:

  • Gradually increasing the full retirement age from 67 to ????
  • Raising or eliminating the payroll tax wage cap for higher earners – current Warren-Moreno bill (this is in discussion only at this point).
  • Modestly increasing payroll taxes.
  • Slowing benefit growth for higher-income retirees.
  • Adjusting future cost-of-living calculations.

There is no way to parse this issue without dealing with the politics.  Any changes made will be vilified with an SSI apocalypse forecast by the opposing parties.  So, what to do?

If you’re already retired—or within a few years of retirement, history suggests you’re less likely to experience significant benefit reductions than younger workers still decades away from claiming. If you’re in your 40s or 50s, it’s reasonable to expect the rules to look somewhat different by the time you retire. If you are Will’s age (20-30’s) plan on waiting and/or dealing with reduced benefits, i.e. save more on your own.

My advice hasn’t changed – build a solid plan, make the right decision for YOUR family, and develop contingency plans with your savings, investments and housing resources.

We hope you’ve enjoyed this series about Social Security – please share your feedback and questions.