The solvency of Social Security is, understandably, a hot topic. The program supplies the majority of retirement income to the majority of retirees.
In fact, 21% of married couples and about 45% of
unmarried persons rely solely on Social Security.
The fear that Social Security may disappear makes it even harder for Baby Boomers to spend a little bit of their savings once they retire.
Many people have the attitude of: “If Social Security goes bankrupt I will need as much in savings as possible to survive. I better not spend a penny or I could be in big trouble if the system crumbles.”
To make matters worse, I have been seeing an increase in scary articles on the internet about Social Security going broke. Why the increase? Because you click on the articles.
News outlets are going to keep producing headlines that grab your attention. It doesn’t really matter if the articles have any academic merit.
Here are some doozies:
Social Security isn’t going broke- it’s already broke.
Report: Social Security Will Bankrupt America Faster Than We Thought
5 Signs Social Security Is Going Insolvent
Please don’t click on those links. You will just stress yourself over inflammatory rhetoric that has no basis in reality.
I want you to make your financial decisions based on the facts, not some random guy’s opinion.
According to the annual trustee’s report, social security is fully funded until 2034 at which point it will be 75% funded until 2093. (source)
Proactive steps are already being taken to keep the system afloat for as long as you are alive.
By increasing payroll taxes from 6.2% to 8.2%, the system would be 100% funded for 75 years.
Congress has already begun increasing the earnings limit on social security taxes. It has been increasing incrementally for years. In the year 2000, you had to pay payroll taxes on the first $76,000 of income. Today the limit is $128,400. (That means Lebron James only pays Social Security taxes on the first $128,400 of his income).
Increasing the limit is a powerful and popular way to increase revenue and keep the system rolling along.
There are several proposals to increase the retirement age to 70. But this does not apply to you.
Cutting Social Security benefits is absolute political suicide. Can you imagine the politician who comes out and says, “If elected I will cut your Social Security and your parents’.”?
Luckily Baby Boomers are the largest and most powerful voting block in the history of this country.
As Dwight Eisenhower once famously said: “Should any political party attempt to abolish Social Security…you would not hear of that party again in our political history.”
Social Security is backed by the full faith of the U.S. Government. What does this mean? The federal government has all kinds of ways to increase funding for any sort of program. Social Security is the financial bedrock for most people in this country.
Cutting benefits would cause widespread bankruptcy, foreclosures, and other economic devastation. Social Security is one of the last programs the government will ever cut. It is just too important to the fabric of our society.
According to Boston College’s Center for Retirement Research, “Don’t start benefits early because Social Security has money problems….you won’t get more if you do. Nearly all proposals to fix Social Security would also protect those age 55 and older.”
To summarize: You will get what your Social Security statement says you are going to get. And you will get it for the rest of your life.
Don’t let this common misconception sabotage your retirement. Many Baby Boomers in this country need to stop saving money once they retire. Be comforted by the fact that you don’t need to obsessively save until your dying day because “you never know” if Social Security will still be there. It will be.