Stop me if you’ve heard this one before: Social Security is going broke, the politicians won’t do anything about, and, if you’re a worker in your 30’s, you’ll be lucky to see a dime of all those FICA taxes you paid. In fact, don’t bother including Social Security when calculating your retirement income.
Seems like we’ve been hearing this lament for decades now. But while it’s true that Social Security is a financial train wreck, and our lawmakers lack the courage to fix it, everyone reading this article will almost certainly receive a Social Security check in retirement. Exactly how much they will receive each month… well, that’s up for debate.
Social Security’s total income is expected to exceed its total costs through 2019. After that, if the government fails to act to increase revenues, Social Security has enough interest income and cash reserves to cover its deficits until 2034. If Washington still hasn’t gotten off its butt and fixed the problems, Social Security will still collect enough in payroll taxes to pay retirees 75% of their monthly benefits until 2090.
Critics insist that Social Security is actually in much worst shape than we’ve been told because the program’s analysts only look 75 years ahead when calculating Social Security’s unfunded obligations. Democratic Vice Presidential candidate Senator Tim Kaine (D-VA) is among those who have called for more in-depth and transparent analysis of Social Security.
But Kaine is unusual among politicians, who typically avoid Social Security reform for fear of alienating older voters. Neither 2016 Presidential candidate has focused on the issue. Hilary Clinton has said she wouldn’t cut benefits but would instead consider raising the Social Security tax wage ceiling. Wage earners currently don’t pay FICA (Social Security) tax on income above $118,500. Republican Donald Trump has said only that he would preserve Social Security.
At some point, Washington will have to make some hard decisions to preserve Social Security, most likely a combination of a higher retirement age, increased payroll taxes and a change in benefits, perhaps with wealthy Americans receiving smaller checks.
But Social Security isn’t going away anytime soon, meaning not in the next several decades.
So continue to count on that monthly check from Uncle Sam when you calculate your retirement income, especially if you are in your 50’s. If you want to play it super-conservative, figure on receiving just 75% of your current expected monthly benefit.
You’ll probably get the full amount, but lowering your expectations will make you more responsible and honest than anyone on Capitol Hill!
Disclosure: This is provided for informational purposes only and should not be the sole basis to forming any decisions regarding Social Security and/or Retirement Planning.