We've talked about the Social Security program here before. It's an important income source for most retired Americans, so we think it needs to be carefully considered in your retirement income planning. Many people have some misunderstandings about the program.
The Social Security program began in 1935 and has never missed a payment. But some people are not optimistic about the future of the program. They worry benefits will have to be cut and, for some people, Social Security is important to their monthly retirement budget.
According to the Social Security Administration, the average benefit is $1,218 per month per person or $29,232 per year for couples. That is income for life that includes an inflation adjustment. This is one very nice component in your retirement game plan.
But there are legitimate issues at work.
The reason for concern? Since 2010, Social Security's total benefits paid exceeded the total deposits from payroll taxes. The difference comes from the Social Security trust fund. Experts tell us that this fund will be exhausted in 2033. Some are concerned that benefits would be drastically reduced at that time.
We've been here before
In 1983, Social Security's trust fund was within a year of running out of money. President Reagan and Congress fixed things by gradually raising the full retirement age from 65 to 66 and eventually, for those born after 1960, to 67, and by increasing the payroll tax in steps. I expect that Congress will take similar steps as we get closer to 2033.
The good news? People receiving benefits are 62 and older. People of this age group vote regularly, they lobby effectively, and there are a LOT of them.
The fix just isn't that hard. Experts predict that a 3% increase in the payroll tax—1.5% for employees and 1.5% for employers — fixes the system for the next 100 years.
For my clients age 50 and older, I see no reason to expect any reduction in projected benefits during their lifetime. That's why I advise them to maximize Social Security and use it as one of their income tools in retirement.
If this blog has got you thinking about your own situation, get in touch with my office ([email protected]).
The opinions of Rich Dunn are not necessarily those of Farm Futures or the Penton Farm Progress Group.