Will It, or Won’t It?

The question in the title refers to Social Security and whether it will or will not be available for individuals who are still years away from filing for their own benefits. It is a popular question posed by investors as they ponder their future retirement income goals. While workers may underestimate how much of a role social security will play in their retirement, the reality is that this income stream may be enough to make those retirement goals more approachable. 

But every year a report on the solvency of social security comes out and most workers react with skepticism that they will ever see any income benefit in their lifetime. Let’s take a look at what might be different this year, and what stays the same. 

For the most part, what hasn’t changed is that current worker payroll taxes are largely what is used to pay benefits to retired workers. For a number of years, these incoming payments exceeded outgoing payments and created the surplus trust fund that current shortages are starting to deplete. Most recent reports suggest that the net cash deficit will deplete the trust funds in 2033.¹ At that point, payment of benefits is once again reliant on tax revenues.

However, Congress has some tools that could extend the life of the trust funds and ensure that there are limited shortfalls in the near future. Those tools include lower cost-of-living adjustments for current beneficiaries, increasing the normal retirement age and higher tax caps. 

It is a possibility that future social security benefits are reduced in one form or another. But as long as there are workers paying into the system, there should be dollars with which to pay some benefits.

When planning for retirement, workers should always include some level of social security payment. But the most secure plan will rely more heavily on personal savings and management of cash flow needs.

If you have questions or would like to discuss the specifics of your situation, please contact your relationship manager or a member of our financial planning team.

Meet Kristan Anderson, CEBS®, CFP® »

Read the Financial Planning Focus November 2021:

• "Act Like an Antique British Car Owner" By Brian Horan, CPWA^® »
• "Oops! She Did it Again." By Cheryl Langston, CFP^® »
• "Don’t Listen to the Carnival Barkers" By Glenn Guard, CFA »

¹Source: https://www.ssa.gov/finance/

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