Whether conventional or social media, assume ominous headlines whenever the Social Security Trustees Report is released, but the news should surprise no one. On your benefit statement, in bold type and with an asterisk, it warns, and has for decades, payroll taxes will be insufficient for future benefits. Use this as a reminder to visit ssa.gov and download your most recent statement. Disregarding your Social Security benefits statement is no different from ignoring your gas gauge.
Misinformation abounds. When the 2019 report was issued, a local award-winning television station announced on Facebook Social Security would run out of money by 2035, but that’s not true. Without any changes, by 2035 benefits would be 79 percent of projections, not rosy but not “out of money” either. Last year, the financial Rubicon was a year earlier; see the faint glimmer of good news, instead.
Social Security’s problem is demographics and mathematics; people live longer and receive more benefits. At age 12 when I began paying FICA taxes, life expectancy for white males was just over 67; now it’s almost 80. In 1982 when Social Security was in a similar bind, Congress put partisan differences aside and fixed the problem. A Republican president and a Congress controlled by Democrats crafted a package with benefit reductions and tax increases. Voila, Social Security was on substantial funding for 50 years. Hint: There’s no free lunch.
You can’t blame your political whipping boy for Social Security’s financial shortfall. Liberals, the 17 in Walton County, like to blame Social Security’s funding woes on tax cuts for millionaires or unjust wars but it’s basic math. Conservatives wail about illegal immigrants receiving benefits, but that’s absurd, too. Every year the Social Security Administration collects hundreds of millions of dollars, without knowing who paid. Sometimes the problem is an incorrectly filed W-2 form or someone not updating a name change. Immigrant workers, unauthorized to work legally in the US, often buy fake Social Security cards allowing them to work. However, since their withholdings aren’t linked to anyone the Social Security Administration holds the money in the Earnings Suspense File. Unless someone claims the earnings, highly unlikely with a fake SS number, the money goes into the Trust fund and pays benefits for aging Americans.
Understand how Social Security operates. Social Security is not merely a savings account for retiree income. Social Security spousal benefits are not tied to actual earnings and can dwarf earned benefits. Surviving spouses and minor children are entitled to benefits. Social Security also provides disability benefits, often the only disability provision many have. Solving Social Security’s funding woes will take political courage, a rare commodity nowadays. The financial services industry exerts tremendous control of Congress and would prefer Social Security to morph into a 401K-type scheme. If you think that’s a good idea, I’ve got a bridge in Brooklyn for sale.
You can’t always get what you want but Buz Livingston, CFP can help you figure out what you need. For specific advice, visit livingstonfinancial.net or drop by 2050 West County Highway 30A, M1 Suite 230.