Is Social Security in its death throes?
Every year, the Social Security Board of Trustees report on the health of Social Security. This year, the report shows that total costs will exceed total income by 2022. Should you panic? Does this mean that social security is insolvent? Not exactly. Social security isn’t dying, it just needs a little TLC.
Social Security Is Sick, Not Dying
Social Security is at risk because so many people started families immediately following WWII. That’s right, blame it on the baby boomers. The country is being overrun with people who are tapping into their social security. The problem is, we don’t have enough active workers to pay for their benefits.
Employees and employers are taxed to help pay for the benefits of those who are currently retired. Social Security runs smoothly when the number of retirees is equal to the number of current workers. Unfortunately, this balance has tilted toward the retirees.
Help! We Need Social Security Reinforcements!
On the current path, the nation will completely exhaust its $3 trillion in asset reserves by 2034. These findings are unchanged from last year’s forecast.
If nothing is done, Social Security payouts will be reduced to 77% of their promised benefits. The problem needs to be addressed, but there’s no reason to think that it won’t be.
Why Social Security Won’t Go Bankrupt
The fact is that the federal government isn’t going to let Social Security go bankrupt. Instead, they’re either going to tax more heavily or cut benefits. The Board of Trustees has recommended option number two: that benefits will be reduced by up to 23% by the year 2034.
No soon-to-retire American wants to hear that their Social Security is going to be reduced. The upside is that Americans in the workforce won’t have to take a pay cut. It’s the harsh reality of too many people retiring at one time. It’s a challenge to be overcome, but it won’t be the wound that puts Social Security out of its misery.