Mar 27, 2021
The theme this week on the One Minute Retirement Tip is the biggest money worries for retirees.
Today, I’m talking about cuts to social security. If there ever was a classic example of kicking the can down the road for the federal government, I think social security takes the #1 spot. It’s not politically popular to mess with the income of a large voting block of retirees, so our politicians will likely keep kicking that can until we’re in a real crisis situation.
According to a 2020 article in AARP, the social security trust fund is expected to run out by 2031. That 10 years will be here pretty quickly, and it’s anyone’s guess what will happen. Keep in mind that the current revenue coming into social security from working americans will continue to fund social security payments to retirees, but 100% of those payments won’t be covered. The amount of current benefits that would still be paid out without any reforms to social security is somewhere in the 75% range.
So if you hear people talking about benefits stopping when the trust fund runs out, just ignore them. It’s not correct. Even with no money in the trust fund, the payroll tax revenues are still pouring in to pay current benefits for retirees.
Because too many low-income and retired Americans rely on every penny of their social security checks in retirement, I don’t think they’ll mess with current benefits to current retirees, and I wouldn’t be concerned about it, especially in your 50s and 60s.
I think they’re much more likely to raise taxes or raise the age you can start social security, but worrying about getting the rug pulled out from under you when you’re relying on social security in retirement is not a rational concern in my opinion. The reforms will impact working Americans the most and may result in reforms like someone my age not even having the option to start social security until later, or incorporating means testing which would result in lower social security checks for higher-income retirees.
That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip.
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