The Unsure Future of Social Security and Your Retirement

The Unsure Future of Social Security and Your Retirement
A sign is seen outside a U.S. Social Security Administration building in Burbank, Calif., on Nov. 5, 2020. (Valerie Macon/AFP via Getty Images)
Mike Valles
In the past, Americans looked forward to the day they could retire and collect Social Security. It was something that you could count on because you had been paying for it your whole working life. Now, it seems this staple of life can no longer be counted on in the not-so-distant future.

What the Social Security Administration Says

Problems 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.
Another reason for the growing shortage of funds to maintain the program is that women have fewer children, says CNBC. The number of children the average woman would have in 1964 was 3.2, but it dropped to 1.8 by 1974.

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.

The result is that the funds are slowly being depleted. Although several sources say that the SSA cannot maintain 100 percent of its current level of support past 2035, the SSA says it can do so until 2037.

Reduction in Benefits

The 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 Change

In 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.

Proposals to fix the shortfalls are already in the works. CNBC mentions that Senators Bernie Sanders (D-Vt.), Elizabeth Warren (D-Mass.), and Representative John Larson (D-Conn.) have already submitted their ideas.

What the Projected Future for Retirees Means

At 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 Now

If 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.
Many people today want to retire young, but when you retire before 67, your Social Security benefits are reduced by 8 percent each year. Merrill says that waiting until you are 67 means you get 8 percent more each year above 62. The more you get from Social Security, the less money you need from other sources.

Other Ways to Ensure a More Comfortable Retirement

In addition to waiting before claiming Social Security, here are some other ways you may want to consider to prepare for a happy retirement.

Retirement Accounts

Employees 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.
Many employers offer to contribute to their employees’ retirement accounts on a matching basis—up to the limit they specify. You can take advantage of this option by contributing at least up to the matching amount. After all, it's free money.

Health Savings Accounts

You 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.
The advantage of this kind of health plan is that your money is pretax and grows tax-free. When you withdraw the money for health costs, you do not pay any taxes on it. After you reach 65, you can use it for any purpose. Money in an HSA is best left alone for maximum growth, and paying your health costs out-of-pocket enables you to save more money.

Best Places to Retire

You 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.

The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
Mike Valles has been a freelance writer for many years and focuses on personal finance articles. He writes articles and blog posts for companies and lenders of all sizes and seeks to provide quality information that is up-to-date and easy to understand.