For millions of retirees, Social Security benefits make the difference between enjoying a comfortable lifestyle and struggling to make ends meet. In fact, according to the Social Security Administration, about one-quarter of married couples and about half of unmarried beneficiaries depend on monthly checks for at least 90% of their retirement income.
However, Social Security may not be as reliable as it once was, and a chance benefit may be reduced or reduced or completely eliminated in the relatively near future. It can cause disaster for current and future retirees, but whatever happens to Social Security, there are ways to make a financially secure retirement.
Profit can be cut
Social Security has been struggling for years, and benefit reductions are not a new concept. What is worrisome though is that the profit may be lower than expected.
The Social Security Administration (SSA) relies primarily on payroll taxes to pay benefits. But older Americans still live longer after retiring, with more money being paid than the benefits currently being collected in payroll taxes. As a result, SSA is dipping into its trust fund to cover the deficit.
Those trust funds are being quickly run out of cash, and earlier this year the SSA estimated that the funds would expire as soon as 2034. At that time, the money coming from payroll taxes would be enough to cover only an estimated 76% of the profits.
How COVID-19 has affected social security
The COVID-19 epidemic has added to the problem. With millions of Americans out of work, very little cash is coming from payroll taxes. In addition, many older workers were laid off and forced into early retirement to claim Social Security benefits rather than help pay the bills.
As a result of COVID-19, SSA’s trust funds are now expected to decrease by 2031, according to a recent report by the Congressional Budget Office.
Additionally, President Trump is proposing to abolish payroll taxes altogether. If this happens, SSA will need to rely solely on its trust funds to continue paying benefits, and those funds could be reduced by 2023, SSA recently revealed. Then once those funds run out of money, with no payroll taxes to continue funding benefits, Social Security may disappear if Congress does not find another source of income to continue the program.
Protecting your retirement
One of the best ways to protect your retirement against the potential benefit deduction is to build a strong retirement fund so that you do not depend on Social Security. This can be challenging if you are only a few years out of retirement, but if you still have a lot of time left to prepare, it is a good idea to only surcharge your savings when the benefits are low Or expire.
There are also some ways by which you can increase the size of your monthly checkups, which can help if profits are reduced over the next decade. One option is to delay claiming benefits. You can start claiming Social Security by the age of 62, but if you wait beyond that age to file, you will receive large checks. By delaying benefits until the age of 70, you can get your full benefit amount and get an additional up to 32% every month.
Another way to boost your benefits is to work for more than 35 years before you start claiming. To calculate your benefits, SSA takes your average income over 35 earning years of your career, then adjusts it for inflation. Chances are you are earning a higher salary now than you were 35 years ago, so by working a few more years, you can replace some of the lower-earning years of your career with higher-earning years in your career than ever before. Can. This will result in a higher overall income average, which will also earn you a larger monthly check.
Social Security benefits are a lifeline for millions of retirees, but they may not be as reliable as you think. By understanding what the future of Social Security looks like and what steps have been taken to boost your monthly check, you can protect your retirement as much as possible.