Trust Fund to run dry by 2031, causing 25% benefit cut
The pandemic has brought considerable financial challenges to those facing retirement. Many people have lost their jobs, been forced into early retirement, or delayed retirement indefinitely. This has put a spotlight on concerns about Social Security, which is a major source of income for retiring individuals.
However, there remains a lack of understanding about how Social Security benefits work. In the same Nationwide survey, over 50% of respondents failed a basic quiz about Social Security retirement benefits.
Key facts about Social Security
It’s meant to supplement your savings. Social Security was originally intended to provide older Americans with continuing income after retirement. However, it was not designed to meet all the financial needs that arise post-retirement. In fact, Social Security accounts for about 40% of the income of Americans over the age of 65, according to the Social Security Administration.1
You can take reduced benefits early... You may begin to receive retirement benefits as early as age 62; however, if you choose to take benefits earlier than your full retirement age, you will have to take permanently reduced benefits for the duration of your retirement.
… but it pays to wait. People who delay retirement beyond their normal retirement age receive a special increase in their benefits when they do retire. Social Security benefits will increase approximately 6% - 8% for every year you delay after age 62, up to age 70.
Don’t forget about the spousal benefit. Even if your spouse has never worked outside your home or in a job covered by Social Security, he or she may be eligible for spousal benefits based on your Social Security earnings record.
An Uncertain Future
Earlier this year, the Social Security and Medicare trustees announced in their annual report that the trust funds would be depleted by 2035. In September, the Congressional Budget Office updated its budget outlook with startling results: due to emergency stimulus spending and reduced tax receipts, the trust fund is predicted to run dry in 2031, with a 25% benefit cut starting that year.2
More than 60% of adults surveyed say they now worry about Social Security running out of money.3
It’s more important now than ever before to optimize Social Security benefits. Know your benefit and understand your options. Do you need to run your numbers? Contact our office today to learn more about our financial planning services, which include Social Security planning.
- 1. SSA.gov; Fact Sheet: 2020 Social Security Changes
- 2. Nationwide Retirement Institute 2020 COVID-19 Social Security Survey
- 3. Investment News, October 19, 2020