Do you Expect Social Security to be Viable When You Retire?
We get asked frequently whether we think Social Security will be around when our clients are eligible to take it. Although we often hear negative news about the topic, there’s no way of knowing with certainty.
Social security is mostly funded by people who are currently in the workforce making payments into the system. It benefits those who are out of the workforce and now receiving from the system. Initially, when the Social Security program started, more people were working than in retirement. Now, as baby boomers move off the payroll, we’re starting to experience the opposite side of the coin. Right now, we know that 75% of social security payments are covered by working people. Additionally, the fund that is supposed to handle payments for the other 25% is fully funded until 2033 (it could also be sooner than that).
Social security is only deducted from paycheck until a person’s annual income reaches 150k a year. Most of the deficit problem could be solved if the government changed the law, and everyone paid into it regardless of annual income. This is one potential solution to the problem. There are also more drastic measures. Politicians sometimes talk about those with the intent of scaring the population into voting for one or another. The last people you want to listen to when it comes to the matter are the very people who oversee it.
Finally, from a financial planning perspective, we expect social security to be around because most people need it for their retirement plan to work and we know that there are reasonable solutions to the lacking of funds problem.