The struggles of Social Security are well documented.
To put it bluntly, the trust fund that supports Social Security’s disability payments is nearing empty.
If (and when) that happens, the 61 million people who now receive Social Security disability payments will most likely see an automatic cut in benefits.
So, if you’re counting on Social Security checks to live on when you retire, you’re making a big gamble – one that most likely won’t pay off.
The math gets even scarier when you consider that over the next 75 years, Social Security is projected to pay
If we adjusted that number for future inflation, that means our Social Security program will be underfunded by about $35.3 trillion in today’s dollars. Just how big of a gap is that? $35.3 trillion is TWICE the entire national debt!
Instead, due to the $14 trillion-dollar shortfall we now have in Social Security, they’ll keep “rigging” the numbers to make the situation look far better than it really is.
Here’s a perfect example: the life expectancy for a 65-year-old in the United States is now 87 years. If you look inside the Social Security trustee report, they document the life expectancy as 76 years. That’s an eleven-year difference, which completely changes all of the numbers and projections, of course.
Since Social Security is the third rail in politics, they won’t dare make drastic changes out in the open. But changes will be made clandestinely and quietly, where and when few people notice them.
That’s what happened last year in the budget deal, when they closed a loophole called File and Suspend. This loophole allowed a spouse or ex-spouse to piggyback on their partner’s benefits, while also allowing their own benefits to grow. It was an excellent way for spouses to maximize their retirement benefits, but that’s gone now.
Another way they’ve tried to close the gap on Social Security is by reducing benefit payments by lowering the inflation rate. They just announced that Social Security’s cost of living increase is only .2%.
However, the two biggest expenses for retirees, health care and housing, have increased dramatically, so the minuscule .2% adjustment is unrealistic and ineffectual. A week after that announcement, Obamacare in California announced an increase of 13.2% in premiums!
These strategies our government is currently sneaking into legislation amount to only a Band-Aid to fix a heart attack.
If the government does nothing significant and far-reaching to overhaul Social Security, we’ll see a 79% reduction in retirement benefits by 2033.
I don’t think the government will sit back and do nothing about the crisis, but they will wait until the last minute – and by then, it may be too late. As a result, I think we’ll see increases in Social Security taxes, age requirements, and a reduction in benefits. But they would never outright just cancel or shut off Social Security benefits because that would fell our whole financial system.
So, the worst-case scenario is that our federal government keeps printing money just so the masses can receive their benefits, although that will cripple other aspects of the economy.
Of course, the earliest you can receive your Social Security retirement benefits is at the age of 62. If you wait to receive your benefits past that, you’re rewarded with an 8% increase per year plus inflation, guaranteed.
(By the way, no other investments can guarantee an 8% annual return – and if they promise you that, run!)
Social Security maxes out its retiree benefit at 70 years old. So, let’s say that at 62 years old your Social Security benefit is $750 dollars a month. If you wait until 70 to receive your benefits, you’ll receive $1,320 dollars a month. Just with the ability and choice to postpone taking benefits for eight years, your monthly guarantee check nearly doubles.
Therefore, if you’re healthy, still working full time, or don‘t need the money, it’s best to wait until 70 years old to receive your Social Security benefits. But if you’re not in the best of shape or need the money from Social Security, then of course you should take it.
Remember, too, that based on your total income and the amount you received from Social Security, your retirement benefits can become taxable. I can cover that with you individually to see if you have exposure.
This is just a very quick rundown of why Social Security may not be the retirement bedrock you anticipate. Contact me so we can go over your financial situation and make sure you’re on track for a comfortable retirement!
Your Financial Guru