A lot of people are down on Social Security. Here’s why you don’t need to stress.
Will Social Security be there for you when you retire? If you ask today’s workers, that’s questionable.
In fact, many people are convinced that Social Security is on the brink of ruin, and that their retirements are doomed because of that. But here’s why the situation isn’t as terrible as you might think it is.
1. Social Security’s main revenue source isn’t going away
Social Security gets the bulk of its funding from payroll taxes. And for that reason alone, the program will continue to be viable for many years despite near-term financial shortcomings.
It’s true that in the coming years, Social Security expects to owe more in scheduled benefits than it collects in revenue. It’s also true that benefit cuts might have to happen once the program’s trust funds run dry — an event that may be on the table in about a decade from now.
But Social Security can continue to sustain itself by continuing to tax workers on their income. And since people will perpetually need to work, the program should have a perpetual source of funding.
2. Lawmakers are working to avoid benefit cuts
While Social Security cuts may be on the table in the not-so-distant future once the program’s trust funds run out, lawmakers really do not want to see that happen. And while an official solution to that problem has yet to be introduced, lawmakers are working on one.
So far, there are several proposals that have been floated around, including raising taxes on wages to pump more money into Social Security and raising the wage cap for which those taxes apply. There’s also been talk of pushing back full retirement age, which is the age when Social Security recipients are eligible for their monthly benefits in full.
Furthermore, this isn’t the first time Social Security has entertained the possibility of benefit cuts. But lawmakers managed to avoid them in the past, so hopefully, they’ll manage to do so again.
All isn’t lost
You may be ready to give up on Social Security for your retirement. But there’s really no need to.
In a worst-case scenario, you may not end up with the full monthly benefit you’d normally be entitled to based on your personal wage history. But a slashed benefit is better than no benefit at all. And there’s a good possibility lawmakers will manage to avoid Social Security cuts entirely.
That said, it’s a good idea to save for retirement on your own so you’re not so reliant on Social Security. Even if nothing changes with the program for the worse, those benefits will only replace about 40% of your pre-retirement income if you earn an average wage. Most retirees need a lot more income than that for a comfortable lifestyle, so it’s in your best interest to build up a strong nest egg regardless of what transpires with Social Security.
In fact, the simple act of actively saving for retirement might give you peace of mind as you read news of Social Security-related doom and gloom. And that’s an important thing for your mental health in the course of your retirement planning.
