Social Security benefits are still projected to start running out, but a recent report released by the Treasury said benefits may not need to be cut until 2035, one year later than previously forecast.
Trustees said that the Social Security trust funds will begin to run out of money by 2035 and senior citizens can expect their benefits to be reduced by 17% unless Congress takes steps to shore up the program. Increased wage growth and low unemployment are why the trust funds gained another year of solvency.
However, the calculations were made by combining the Old Age and Survivors Insurance (OASI) Trust Fund (from which Social Security benefits are paid) and the Disability Insurance (DI) Trust Fund. The combined projection of the two funds is frequently used to indicate the overall status of the Social Security program. On its own, the OASI fund is projected to reach depletion by 2033.
“More people are contributing to Social Security, thanks to strong economic policies that have yielded impressive wage growth, historic job creation, and a steady, low unemployment rate. So long as Americans across our country continue to work, Social Security can — and will — continue to pay benefits,” Social Security Commissioner Martin O’Malley said. “Congress can and should take action to extend the financial health of the Trust Fund into the foreseeable future, just as it did in the past on a bipartisan basis.
“Eliminating the shortfall will bring peace of mind to Social Security’s 70 million-plus beneficiaries, the 180 million workers and their families who contribute to Social Security, and the entire nation,” O’Malley continued.
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Americans need more money to retire comfortably
U.S. adults believe they will need at least $1.46 million to retire in style, according to a recent Northwestern Mutual survey. This figure is up 15% from the $1.27 million Americans said they needed last year. In 2020, survey respondents thought having $951,000 stashed away would provide a good enough cushion.
At the same time, the average amount Americans have saved for retirement dropped to $88,400 from $89,300 in 2023 and is more than $10,000 off its five-year peak of $98,800 in 2021.
“People’s ‘magic number’ to retire comfortably has exploded to an all-time high, and the gap between their goals and progress has never been wider,” Aditi Javeri Gokhale, the chief strategy officer, head of institutional investments and president of retail investments at Northwestern Mutual, said. “Inflation is expanding our expectations for retirement savings, and putting the pressure on to plan and stay disciplined.”
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Retirement age shifting for many
The Northwestern Mutual survey said that Gen Zers have bigger retirement goals and will need $1.6 million to retire comfortably. Despite the bigger goal, this generation of U.S. adults plan to retire by age 60 because they started saving for retirement earlier.
By contrast, a recent Nationwide survey said that a growing number of Americans nearing retirement age said it’s impossible to stop working at age 65.
Most Americans (69%) nearing retirement, aged 55 to 65, said that the norm of retiring at 65 doesn’t apply to them and 67% anticipated facing more challenges in retirement than their parents and grandparents. As a result, 41% said they planned to keep working in retirement to supplement their income out of necessity, and 27% are cutting back on spending to fund their retirement goals. Moreover, 22% have extended their retirement age.
“Many of us watched our parents and grandparents enjoy a smooth transition to a secure retirement powered by traditional pension benefits,” Nationwide Annuity President Eric Henderson said. “Today’s investors are having a tougher time picturing that for themselves as they grapple with inflation and concerns about running out of money in retirement.”
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