Social Security has been in the news again lately. The 2019 Annual Report of the Board of Trustees revealed that the Social Security trust fund can no longer guarantee full benefits by the year 2035. This is one year later than was previously forecast but, it is still a dire prediction.
News like this strikes fear in the hearts of workers and retirees alike. According to SSA.gov, among elderly Social Security beneficiaries, 48% of married couples and 69% of unmarried persons receive 50% or more of their income from Social Security. That represents a huge number of present and future retirees who would be greatly affected by any reduction to Social Security benefits.
The good news is that there is something that can be done. Congress can choose to act in order to help the program. While there are options available to Congress, many of them would require a reduction of benefits which, in my opinion, is not in the best interest of retirees.
It is my hope that history, as it often does, will repeat itself in this situation. During the Reagan administration in the early 1980s, Social Security faced a similar crisis. In 1983 amendments were passed to phase in a gradual increase in the retirement age from 65 to 67. At the time this law passed I was 21 years old. To me, 67 was not much different than 65; they both sounded pretty old. Further adding to my relative calm regarding this change was the fact that I would have more than 40 years to plan and prepare for it. It is my belief that there was little if any negative effect on me personally from this legislation. It did, however, protect me and millions of other Americans from facing reduced benefits that would, in my opinion, have had a much bigger impact.
I have faith that Congress will act to protect Social Security benefits. It would be too great a risk for the country to have to reduce benefits to 80 cents on the dollar. It is my opinion that my children will probably face a fate similar to my own; they will be told that they will not reach full retirement age until 68 or 69, 1-2 more years than the current full retirement age of 67. Fortunately, if this happens, they will have 40+ years to plan for it. It is likely that they will be affected in much the same way that I was. They will experience little to no negative impact by waiting a couple more years to reach full retirement.
For now, all we can do is wait for Congress to act. Once they propose legislation, the number crunchers will be able to reassess the situation. In the meantime, I have encouraged my clients to continue to plan as they always have, including Social Security as a piece of their retirement puzzle but, making sure that additional funds are available through retirement, investment, and other savings accounts.
In the end, none of us can predict the future but, we can make a plan that will help us to prepare for a variety of scenarios. If you would like to discuss Social Security and/or a plan that will help you to prepare for the future, please contact our office and we would be happy to answer your questions to the best of our abilities.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss.
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