Posted on 06/24/2018 11:52:27 AM PDT by SeekAndFind
If you read the latest Social Security Trustees Report, you're aware that the program's combined trust funds are expected to run dry in 2034. And clearly, that's not great news. But before you start panicking about your benefits, it's important that you understand the implications of those trust funds running out.
The most important thing you should know about Social Security's trust funds is that they're not the program's primary source of funding. Rather, the bulk of the revenue that Social Security takes in comes from payroll taxes.
Now for the first time in multiple decades, Social Security is dipping into its trust funds, and will most likely continue to do so for the next 16 years. The reason is that workers have been retiring at a relatively rapid pace, and we're not getting enough replacement workers to allow the program to take in as much money as it needs to pay out. However, once those trust funds are depleted, Social Security will continue to have access to its primary income stream, which means that in a worst-case scenario, future benefits will be cut, not eliminated.
How much of a reduction are we talking about? Based on the latest projections, come 2034, recipients might lose 21% of their benefits if Congress doesn't step in with a fix. And obviously, that's a pretty harsh blow for those who depend on those benefits to provide the majority of their income. But if you're years away from retirement, you can take steps to compensate for the potential benefits cut you might face, thereby ensuring that you don't end up struggling financially.
One major myth associated with Social Security is that seniors can live off their benefits alone. Well, the truth is that they just plain can't. Even if benefits aren't cut in the future, those payments will only replace about 40% of the typical worker's pre-retirement income. Most seniors, however, need more like 80% of their former earnings to pay the bills in retirement. Therefore, if you're still working, you should be taking savings matters into your own hands regardless of what happens to Social Security down the line.
If your employer offers a 401(k), that's certainly a good place to start. At present, you can contribute up to $18,500 annually to a 401(k) if you're under 50, or $24,500 if you're 50 or older. This means that if you're 50 years old and don't have a dime at present, maxing out your 401(k) until age 67 will leave you with roughly $755,000 in retirement savings provided your investments generate an average annual 7% return during that time (which is more than doable with a stock-focused strategy). And that, combined with whatever Social Security ends up paying you, could make for a pretty comfortable retirement.
Of course, not everyone has the ability to max out a 401(k), nor do all workers have access to one. But even if you're only working with an IRA, whose current annual contribution limits are $5,500 for workers under 50 and $6,500 for those 50 and over, or a lower savings threshold due to personal circumstances, you can still amass a sizable sum if you save consistently for many years. In fact, contributing $400 a month over 17 years will leave you with $148,000, assuming that same 7% average annual return. Now, that's not a ton of money, but it could be enough to help fill the gap where Social Security leaves off.
No matter what happens to Social Security, there are two things you need to take away here: The program is not going bankrupt, and it also won't be enough to sustain you in retirement even if benefits don't get cut. And the sooner you start establishing your nest egg, the greater your chances of covering your expenses as a senior, regardless of what your benefits ultimately look like.
Lol, very little will happen since excess SS receipts were spent each year and the "trust fund" is nothing but a bunch of US government IOUs made out to the SS fund.
They'll just make different accounting entries and recognize the current year SS deficits and lump it in with all the other government debt after the "trust fund" has been written off the books.
From the article:
“...This means that if you’re 50 years old and don’t have a dime at present, maxing out your 401(k) until age 67 will leave you with roughly $755,000 in retirement savings provided your investments generate an average annual 7% return during that time (which is more than doable with a stock-focused strategy)....”
OK now, who actually has gotten an average of 7% on their 401(k) ??
Reminds me of the time when elRushbo facetiously bragged about getting his Mom a can opener for Mothers Day for the cans of dog food she would be living on when SS went broke. Fmr Sen Pat Murray from CO. who made Maxine Waters and Sheila Jackson Lee look like Rhodes Scholars actually thought he was serious and made an ass of herself bringing it on the Senate floor.
bmp
More than likely benefits will cotinue to be paid to everyone getting them but good luck to those on fixed icomes when inflation hits double digits or more long term
Which short of just cutting it all off ia what moat likely will happen
We start harvesting asteroids.
The most important thing you should know about Social Security's "trust funds" is that they are NOT trust funds. They are simply off-budget debt, mislabeled as a deliberate and highly successful tactic to misinform and manipulate the American public. When the nominal "trust fund" is exhausted, Congress will face a choice: cut benefits by about 25-30 percent to match payroll tax revenues; raise Social Security taxes, making an already lousy program an even bigger loser for even more people; or accepting general revenue funding. The latter is probably the easiest option politically, but at that point pressure will mount to finally accept Social Security as nothing more than an old-age welfare program and to rationalize it as such. Benefits will be means tested and people with retirement income, significant pensions and/or private savings will lose their eligibility.
Stop the “crazy checks” that are used to buy minority votes. Then you’ll have enough money to pay people whose money you took.
Welfare, WIC, Section 8 housing and every other boondoggle massive social welfare program had better “run out” before a program packaged and sold as an old age “pension” for which people were taxed and benefit statements provided, taxed to the point that many were unable to save for retirement in any other fashion. Paychecks for snotty Congressional aides who think they’re oh so much better than the great unwashed had better be bouncing before they cut Social Security. It’s not just the old folks, it’s their kids who will be enraged. And for those who dismiss Social Security as a pittance, know that in the real world of majority conservative voters out here in flyover Trumpland, yes you can live off of it.
There are a few FBI employees whose pensions need to be snatched. Throw those into the Social Security trust fund. You know, the “lockbox”.
The key will be boiling the frog slowly enough so the majority of frogs don't realize that's exactly what is happening.. Too fast, and it turns into Venezuela, then all bets are off.
There has not been an actual trust fund for Social Security in quite a number of decades. Just a file with useless government IOUs.
OK, I will raise my hand and say: "I have". DW has also.
Actually 7% should be as easy as falling off a log. The Compound Annual Growth Rate for stocks has been close to 10% for a century. Nothing more exotic than putting it all in an S&P 500 tracking fund would accomplish that.
Of course if you fall for any of the financial film-flam, or decide that stocks are "too risky" you, and your 401(k), will be left in the dust. I fully believed that SS would run out of trust fund in my lifetime after reading about it 30 years ago, and saved accordingly. I have never believed the promises of the government. Ask any Native American how well that works out.
This is pretty pollyannish. If you cut social security benefits by 21% then there will be a revolution. If you increase social security taxes by 21% then I suspect a lot of people will pull their support for social security, particularly the young. And I think this problem is going to begin to fester even before social security exhausts the trust funds. The reason is that they will need to raise taxes or print money or both in order to honor the IOUs in the trust fund. And all this is going to be going on at a time when Medicare will be exhausted as well. It’s not so easy to reduce Medicare benefits.
How many trillion dollars has congress pilfered from monies that were not theirs?
. . . but then - since " the program's combined trust funds” are “invested” in “safe government bonds,” those bonds represent a claim on the US Treasury, neither more nor less. Since the government budget is in deficit not surplus, the Treasury has to borrow the money to redeem those bonds.That is to say, "the program's combined trust funds” are not a substantive value to the government, but only an IOU which the government wrote to itself and carefully sequestered. Exactly as if you personally wrote an IOU for ten million dollars and signed it. You could do it, all it takes is a piece of paper and a pen - but you can’t let anyone else have it or it will bankrupt you.
The result is that "the program's combined trust funds” are nothing but a record of money the government borrowed and spent. There three things in aviation that are useless: altitude above you, runway behind you, and fuel used. And the useless thing to a treasury is “money spent.”
I’m decades away from being eligible for Social Security payments and know that they won’t be available.
Several in the IRS should be on that list.
They’ll raise the payroll tax, and then they’ll blame Republicans when the increase kills jobs.
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