Is Social Security Running Out?
Is Social Security About to Run Out?
Well no, not entirely. The annual report, released by Social Security system states, “the combined trust funds that help pay old age and disability benefits are likely to run out by 2034, the year when today’s 48-year-olds reach full retirement age.” These rumors are sparked by the misconceptions of how Social Security works and where these funds originate. Social Security is not money that has been put away by an individual early in life to draw on later; like a savings account. Social Security is collected taxes on today’s workers to fund benefits of today’s retirees.
If Not Entirely, How Much Social Security Is Left?
The annual report, mentioned above, states about 79% of scheduled benefits are still being paid by individuals in payroll taxes. taxes on higher earning beneficiaries will allow the Social Security system to take in more money than it pays out each year. Once it begins to crossover, Social Security will pay its beneficiaries with past surplus; the estimated surplus end date being 2034.
What is Causing This?
Americans are starting to live longer, increasing the amount of years they are dependent upon Social Security. This, in turn, increase the amount of people per year that are receiving these funds. In addition to people living longer, Baby Boomers have already entered retirement and started to collect their benefits. Another associated cause is Americans having fewer children than before, which decreases the workforce over time and lowers the amount collected on workforce taxes.
If congress intervenes to keep Social Security on track, we could expect to see a higher retirement age or raised taxes on the wealthy over the next 15-20 years. No matter what happens, it is important not to rely on Social Security for your sole source of income during retirement. Plan ahead to ensure you live comfortably when you reach retirement, a milestone in like that should not be accompanied with undue stress.