What the Social Security Administration SaysProblems with the ability of the Social Security Administration (SSA) to maintain the current level of support for seniors have been known for a few years now. The primary cause for the problem, the SSA says, is that the number of seniors claiming Social Security—or who soon will be—has exceeded the number of people paying into it.
Besides having fewer people paying into the program, people are now living longer. It means each person on Social Security is getting a larger portion of the pie than they were even 15 years ago.
Reduction in BenefitsThe SSA is now saying that retirees—if there are no changes to the program—will only be able to get about 80 percent of the amount that is currently available. The program never intended to provide all the income a retiree needs, but to give seniors an additional amount to supplement other sources.
Enough Time for ChangeIn the past, there have been two other times when changes have been made to the Social Security program to keep it going. They occurred in 1977 and 1983. In 1983, Congress raised the age of those eligible for full benefits from 65 to 67—which was enacted in 2000.
Congress still has time to ensure that the program can continue to supply the same level of support for seniors. The extra money could come from increased Social Security taxes from employees' regular paychecks and higher costs for the self-employed.
What the Projected Future for Retirees MeansAt this time, it is uncertain what can be expected from the SSA when you retire. It appears that you may be able to count on at least 80 percent for a while—but it is uncertain how long that can be maintained—until some definite changes are made to the program.
What It Means for People NowIf you have not yet reached retirement age, some retirement planning is needed to ensure that you have sufficient funds during your retirement years. Remember that if you retire at 67 (full retirement age for Social Security), you can expect to live another 12 to 20 (or more) years. No matter your age, you need to start saving for retirement now—if you have not already done so.
Other Ways to Ensure a More Comfortable RetirementIn addition to waiting before claiming Social Security, here are some other ways you may want to consider to prepare for a happy retirement.
Retirement AccountsEmployees may have the option to start saving for retirement through an employer-offered 401(k). It offers an aftertax way to save for retirement, enabling retirees (at least 59 1/2) to withdraw funds tax-free. Contributions are tax-deductible. Required minimum distributions must start at 72. In 2022, you can contribute up to $20,500 if you are under 50 and up to $27,000 if 50 or over.
Health Savings AccountsYou can also save money with some types of health accounts designed to save money. Your employer may offer a health savings account (HSA). These plans require that you have a health insurance policy that has high deductibles. This type of policy is better if you and your family are in good health, or you may be spending money that should go into savings for deductible expenses.
Best Places to RetireYou can also make your retirement money go further if you move to a state or area where the cost of living is lower. It is apt to be a small town or more rural area because it is more expensive to live in large cities. You can research the “best states to retire” when you want to know more.
Other kinds of growth for your money are available from other sources. For the best growth of your retirement money, including Social Security, you should see a financial advisor, who can help you to get much more than you can on your own.