Each year, the Social Security Board of Trustees releases its report on the current and projected financial status of Social Security and Medicare programs. According to its latest report, Social Security won’t be able to pay full benefits by 2034, unless Congress takes prompt action.
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The Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund, which pays out benefits to retirees, survivors and those with disabilities, will only be able to pay scheduled benefits until 2034. At this time, the fund’s reserves will be depleted and incoming income tax will only be able to pay 78% of scheduled benefits. While this may sound worrisome, these projections aren’t set in stone.
“I’ve had questions, especially from older clients,” said Kris Jerke, president of Ascend Financial, as reported by Barron’s. “I’m not as concerned about Social Security in regard to them and their future as I am for our 25- to 30-year-olds that have 30 or 40 years to retirement. I tell them, plan for [Social Security] not being as substantial down the road.”
Many advisers believe that policymakers will step in to ensure that Social Security remains sustainable, with possible solutions ranging from raising the taxable earnings cap, raising the Social Security tax rate and investing funds in equities.
“They always act, because of the political realities,” stated Nancy Altman, co-founder and president of Social Security Works, Barron’s reported. Considering the Social Security program has such widespread support, politicians will almost certainly take necessary steps to prevent substantial benefit cuts.
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Todd Soltow, co-founder of Frontier Wealth Management, believes that it’s beneficial for people to realize that Social Security won’t provide enough income to maintain pre-retirement lifestyles. Social Security was created under the premise that it would supplement income, not replace it entirely.
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This article originally appeared on GOBankingRates.com: Future of Social Security: Why Experts Say Not To Worry, but Still Plan For Less ‘Substantial’ Payments