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Ask an Advisor: When Will Social Security Run Out?

D Cator 2014
Donna L. Cator, CFP®, CDFA®
Vice President, Wealth Planning Advisor
[email protected]
(585) 419-0670 x50623

Without a doubt, as a wealth planning advisor, the question I get asked most often about social security is straightforward: “Will social security be there for me when I need it?”

The short answer is, yes. Whether you’re a baby boomer, Gen Z or anywhere in between, social security will be around in some shape or form.

Currently, there are enough reserves in the system to be able to pay 100% of promised benefits until 2033. The last time Congress made major changes to the social security system was in 1983, just months before the trust fund was about run out of money. Those changes bought 50 years of solvency. Theoretically, Congress has until 2033 before they must worry about that happening.

Here are five ideas that have been proposed to increase the reserves for decades:

  1. Increase the maximum earnings subject to Social Security tax. Currently, only $168,600 in earnings is subject to the 6.2% tax paid by you and your employer. This is a 12.4% total payroll tax.
  2. The 12.4% payroll tax could be increased.
  3. The normal retirement age could be increased again as life expectancies increase. Currently, full retirement age is 66 for people born between 1943-1954 and 67 for people born 1960 or later.
  4. The benefit formula used could be changed somewhat so that future benefits would grow at a slower rate.
  5. The formula for cost-of-living adjustments could be changed resulting in smaller benefit increases.

Most likely we’ll see a combination of two or more of these ideas. Rest assured; lawmakers will address the solvency of social security system—we just don’t know when.

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