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"I will never receive anything from social security – it goes bankrupt!" bad perception Participants in my retirement planning workshops, as well as the general public, are constantly coaching me.
It's something you can count on: if you live to the age when you qualify for Social Security benefits, you will receive Something of social security. However, your benefits could be reduced in the future if our leaders did not find the courage to make difficult choices. Let's see how to encourage our leaders to badume their responsibilities.
First, let's clear up this common misconception.
Social security does not go bankrupt!
Social security provides an essential monthly income for retirees and disabled workers who meet the criteria for eligibility for retirement or disability benefits. Social security finances benefits for current beneficiaries from two main sources:
- Social security contributions collected from current workers, who currently provide about three-quarters of program funding.
- The Social Security Trust Fund, which finances the remaining costs of the program, accounts for about a quarter of the cost of the system.
You may have heard that the Social Security Trust Fund should be exhausted by 2034 – the result of the last Social Security Trustee Report. Many people confuse the potential exhaustion of the trust fund with the bankruptcy of the system, which will not happen as long as the current workers pay their taxes.
Social security is very popular among the American population. Workers of all ages have older parents and grandparents who can receive benefits. Most workers are willing to pay their taxes to support their older relatives and friends, but also to be able to benefit for themselves. That's why I like to say that as long as we have democracy, we will benefit from some form of social security benefit.
What could happen if the trust fund runs out?
Under the current legislation, if the social security fund exhausts completely, the benefits will have to be reduced overall to the level that can be supported by the taxes then paid by the workers. The Directors' latest report estimates that, unless Congress takes action to put the system on a sustainable path, the trust fund would be exhausted by 2034. By that date, retirees and beneficiaries should benefit from A reduction of benefits of about 25% in total. There is currently no mechanism to determine the exact benefit reduction that would apply to each retiree and each beneficiary.
Let us be clear: a 25% reduction in benefits will be bad news that would seriously harm millions of vulnerable seniors. But at least it's not a 100% discount, which reduces the benefits to nothing.
What can the Congress do to improve the finances of social security?
To put social security on a sustainable path, the choices are quite simple: Congress must raise taxes, reduce future benefits or combine the two. There is an important precedent for this course of action. The last time social security experienced a funding crisis, it was in the early 1980s. In 1983, a Republican President (Reagan), a Democratic House of Representatives headed by Tip O'Neil and a Senate headed by the Republicans then adopted a compromise solution of increasing taxes and reducing benefits.
Today, we must be inspired by the past. "There are many viable proposals and good ideas that can put social security on a sustainable path," said Jason Grumet, president of the BiPartisan Policy Center (BPC). The PCB hosts the Funding Initiative for Our Future, an alliance of organizations dedicated to making a secure retirement for all Americans possible.
The sooner we make the hard choices we need, the better we will be. "Imagine we're in a car heading for a cliff at a kilometer," says Grumet. "Are we now starting to change course or are we holding back at the last moment? The choice belongs to us and our political leaders. "
Increasing taxes and reducing benefits are potentially unpopular decisions that politicians are reluctant to make. However, the long-term social security deficit could be eliminated by a combination of tax increases and benefit reductions, representing an aggregate value of 2.84% of the wage bill covered by the system. That's less than 3 cents for every dollar of wages earned by our citizens, a cost that would be shared by workers and their employers. It seems that we can easily afford to save such a worthwhile program that helps millions of Americans.
"We, the electorate, need to give permission to our leaders to make these tough choices," says Ric Edelman, co-founder of Edelman Financial Engines and personal finance expert. Edelman is also a key participant in the BPC Funding Our Future initiative. He writes: "Write to your congressional representatives to tell them that you are willing to bear the consequences of these choices as the price to pay to put the system on a sustainable path for decades to come. Tell them that you consider that it is a high priority issue to deal with in the upcoming 2020 elections.
And if you hear cynical parents or friends claiming that they will have nothing Social Security, politely disagree with them and show them this post (or the many other good posts on the subject).
At the end of the day: An important part of your retirement planning is to educate yourself about social security, participate in the debate about your future, and vote accordingly.
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"I will never receive anything from social security – it goes bankrupt!" bad perception Participants in my retirement planning workshops, as well as the general public, are constantly coaching me.
It's something you can count on: if you live to the age when you qualify for Social Security benefits, you will receive Something of social security. However, your benefits could be reduced in the future if our leaders did not find the courage to make difficult choices. Let's see how to encourage our leaders to badume their responsibilities.
First, let's clear up this common misconception.
Social security does not go bankrupt!
Social security provides an essential monthly income for retirees and disabled workers who meet the criteria for eligibility for retirement or disability benefits. Social security finances benefits for current beneficiaries from two main sources:
- Social security contributions collected from current workers, who currently provide about three-quarters of program funding.
- The Social Security Trust Fund, which finances the remaining costs of the program, accounts for about a quarter of the cost of the system.
You may have heard that the Social Security Trust Fund should be exhausted by 2034 – the result of the last Social Security Trustee Report. Many people confuse the potential exhaustion of the trust fund with the bankruptcy of the system, which will not happen as long as the current workers pay their taxes.
Social security is very popular among the American population. Workers of all ages have older parents and grandparents who can receive benefits. Most workers are willing to pay their taxes to support their older relatives and friends, but also to be able to benefit for themselves. That's why I like to say that as long as we have democracy, we will benefit from some form of social security benefit.
What could happen if the trust fund runs out?
Under the current legislation, if the social security fund exhausts completely, the benefits will have to be reduced overall to the level that can be supported by the taxes then paid by the workers. The Directors' latest report estimates that, unless Congress takes action to put the system on a sustainable path, the trust fund would be exhausted by 2034. By that date, retirees and beneficiaries should benefit from A reduction of benefits of about 25% in total. There is currently no mechanism to determine the exact benefit reduction that would apply to each retiree and each beneficiary.
Let us be clear: a 25% reduction in benefits will be bad news that would seriously harm millions of vulnerable seniors. But at least it's not a 100% discount, which reduces the benefits to nothing.
What can the Congress do to improve the finances of social security?
To put social security on a sustainable path, the choices are quite simple: Congress must raise taxes, reduce future benefits or combine the two. There is an important precedent for this course of action. The last time social security experienced a funding crisis, it was in the early 1980s. In 1983, a Republican President (Reagan), a Democratic House of Representatives headed by Tip O'Neil and a Senate headed by the Republicans then adopted a compromise solution of increasing taxes and reducing benefits.
Today, we must be inspired by the past. "There are many viable proposals and good ideas that can put social security on a sustainable path," said Jason Grumet, president of the BiPartisan Policy Center (BPC). The GCP hosts the Future Funding Initiative, an alliance of organizations dedicated to making a safe retirement for all Americans possible.
The sooner we make the hard choices we need, the better we will be. "Imagine we're in a car heading for a cliff at a kilometer," says Grumet. "Are we now starting to change course or are we holding back at the last moment? The choice belongs to us and our political leaders. "
Increasing taxes and reducing benefits are potentially unpopular decisions that politicians are reluctant to make. But the long-term social security deficit could be eliminated by a combination of tax increases and benefits reductions, representing an overall value of 2.84% of the payroll covered by the system. That's less than 3 cents for every dollar of wages earned by our citizens, a cost that would be shared by workers and their employers. It seems that we can easily afford to save such a worthwhile program that helps millions of Americans.
"We, the electorate, need to give permission to our leaders to make these tough choices," says Ric Edelman, co-founder of Edelman Financial Engines and personal finance expert. Edelman is also a key participant in the BPC Funding Our Future initiative. He writes: "Write to your congressional representatives to tell them that you are willing to bear the consequences of these choices as the price to pay to put the system on a sustainable path for decades to come. Tell them that you consider that it is a high priority issue to deal with in the upcoming 2020 elections.
And if you hear cynical parents or friends claiming that they will have nothing Social Security, politely disagree with them and show them this post (or the many other good posts on the subject).
At the end of the day: An important part of your retirement planning is to educate yourself about social security, participate in the debate about your future, and vote accordingly.
