Social Security has been a cornerstone of financial security for millions of Americans since its inception. It provides a critical safety net, especially for those who may not have significant savings or pensions. As the population ages and economic conditions fluctuate, the stability of Social Security becomes even more vital. However, the future of this essential program is under threat.
Imagine retiring in America without the safety net of Social Security—a possibility that haunts 40% of retirees who rely solely on this program for their income.
The Threat of Insolvency
Social Security trustees estimate that the program’s fund could run out by 2033, with only 79% of promised benefits payable after that. Larry Fink, Chairman and CEO of BlackRock, has been warning about this, saying we have an obligation to fix the retirement crisis before it’s too late.
These concerns are echoed by many Americans. A recent survey from the Nationwide Retirement Institute shows that 75% of Americans aged 50+ worry that Social Security benefits will run out during their lifetime. Due to these fears, many people are claiming their benefits early.
Potential Solutions to Prevent Insolvency
Social Security faces insolvency, but not bankruptcy. Congress can prevent a crisis by considering options such as investing Social Security funds more aggressively, raising the full retirement age, or adjusting payroll taxes. It might take a mix of higher taxes and delayed benefits to solve this problem. However, no one expects cuts to current Social Security recipients.
Additionally, changing the formula used to calculate benefits could help. Adjusting how benefits are linked to inflation or changing the wage base on which payroll taxes are applied could ensure more sustainable funding. Encouraging more people to save privately for retirement could also reduce reliance on Social Security, providing individuals with a stronger financial safety net.
The Role of Financial Professionals
The outlook for Social Security funding is uncertain, but more people are turning to financial professionals for help. The number of adults seeking advice on maximizing Social Security benefits has risen from 35% in 2014 to 53% today. The math still supports waiting to claim full benefits.
Until policymakers pass changes to fix Social Security’s funding issues, it’s important to take control of your financial future by working closely with an advisor.
For further insights, check out The Watchman Group’s appearances in a recent article on Social Security from Kiplinger Personal Finance by clicking here.
