One of the biggest concerns for Americans is the health status of the Social Security Administration (SSA). According to experts, Social Security is not on the verge of bankruptcy as some believe, but it is in a very delicate situation that could harm its beneficiaries. Social Security faces a financial deficit in the coming years that could lead to benefit cuts.
On one hand, the Old-Age and Survivors Insurance (OASI) Trust Fund is projected to last until 2033, while the Social Security Disability Insurance (DI) Trust Fund will continue to operate without issues at least until 2099. Workers are advised to stay active, increase their contributions to an IRA or 401(k), and delay retirement until after reaching full retirement age.If you are already retired, it is recommended to consult a financial advisor, and where possible, consider a potential return to work.
Social Security Administration’s health
One of the main fears —and well justified— of Americans is the health of the country’s Social Security Administration. There have been several instances where it has been declared that Social Security is on the brink of bankruptcy, which would represent an almost catastrophic scenario for the millions of its beneficiaries, as well as for future retirees. However, experts say that Social Security is not at risk of disappearing, but that benefits will continue to exist, and may even increase.
The reality is that Social Security faces a financial deficit in the coming years, which will very likely result in significant benefit cuts. On the one hand, the Old-Age and Survivors Insurance (OASI) Trust Fund, responsible for paying retirement benefits, has a projected lifespan until 2033. From then on, according to the Social Security Administration, only 77% of benefits will be paid. On the other hand, the Disability Insurance (DI) Trust Fund is expected to operate at full capacity until 2099. If both funds were combined, they would only be useful until 2034, since after exhaustion, only 81% of benefits would be paid.
What can be done about it?
The options for addressing this vary depending on whether the beneficiary is still working or not. If they are still employed, it is recommended to increase their contributions to an IRA or 401(k), as well as to delay applying for retirement once they reach full retirement age. This way, if benefits are cut, they will have a broader baseline. If they are retired, experts recommend that beneficiaries seek the help of a financial advisor who can adjust their financial situation to find solutions. Additionally, in cases where it is possible, going back to work is also an option to diversify income and not rely solely on the monthly Social Security check.
Frequently asked questions
Is Social Security going to disappear soon?
No, the program is not going to go bankrupt or stop existing. However, it faces a funding shortfall that could require cutting the amount of monthly payments starting in 2033 if no action is taken.
How much would my benefits be cut?
It is estimated that if the main retirement fund runs out, the system would only be able to pay about 77% of the promised benefits. If all Social Security funds are combined, coverage would reach 81% of payments.
How can I prepare if I’m still working?
Ideally, you should increase your savings in private plans like a 401(k) or an IRA account. It is also recommended to delay retirement age as much as possible so that your monthly payment base is higher from the start.