Another year, another pessimistic report about Social Security. This past week the annual report from the trustees for the federal government’s Social Security and Medicare programs was released, and while it showed some slight improvement in short-term outlook, the long-range forecast remains gloomy. As the rapidly-growing number of retirees collides with a shrinking labor force, the Social Security trust fund is projected to be depleted by 2035.
Pessimistic Outlook for Present and Future Beneficiaries
This is a critically important topic, and we bring it to your attention here on the AgingOptions blog because Social Security affects a huge swath of the American public – current beneficiaries, future beneficiaries, and their families. Those most urgently affected are those now on the cusp of retirement. As Rajiv Nagaich states, “If you are 50 or older, you absolutely cannot afford to ignore this issue. After all, the closer you are to retirement, the fewer your planning options and the less time you have to adjust.” In Rajiv’s view, a LifePlan and a retirement dashboard are the essential tools you will need so that you can retire on your timetable, not someone else’s. We’ll explain more in a moment.
To highlight the significance of the issues facing Social Security, we found a timely article to bring to your attention. The Wall Street Journal wrote about the Social Security report just a few days ago. “Social Security’s costs are expected to exceed its income in 2020 for the first time since 1982,” wrote reporter Kate Davidson, “forcing the program to dip into its nearly $3 trillion trust fund to cover benefits.” Here’s the upshot: “By 2035, the trust funds for both programs will be depleted, and Social Security will no longer be able to pay its full scheduled benefits unless Congress steps in to shore up the program, according to the report.” The problem is that Social Security only has two major revenue sources, tax revenue from those currently working and interest from its trust fund. With a depleted trust fund and a declining work force, both revenue sources are in jeopardy.
Pessimistic Outlook: Potentially Catastrophic Benefit Reductions
Unless Congress and the Administration act quickly, retirees are going to take a potentially catastrophic hit in barely 16 years, the trustee report warns. According to the Wall Street Journal, “‘Both Social Security and Medicare face long-term financing shortfalls under currently scheduled benefits and financing,’ the trustees wrote, urging lawmakers to take action sooner rather than later to give policy makers enough time to phase in changes. Without changes, by 2035 Social Security recipients will get only about three-quarters of their scheduled benefits.”
The Journal article reported that nearly 53 million people received Social Security retirement and survivor benefits in 2018, not counting more than 10 million who received disability benefits. But Social Security is not the only major program in jeopardy. “The report also said Medicare’s hospital-insurance fund would be depleted in 2026,” putting future medical benefits at risk. (Medicare currently serves nearly 60 million beneficiaries.) The cost of Medicare and Social Security combined could amount to almost 12 percent of gross domestic product in 2035, analysts say, up from less than 9 percent today. “The latest projections suggest the problem could affect not only future retirees, but also current ones,” writes Davidson in the Wall Street Journal. “Today’s newest retirees will be 72 when Medicare’s hospital trust fund is depleted, and 78 when the Social Security retiree trust fund runs out, said Maya MacGuineas, the president of the Committee for a Responsible Federal Budget. ‘That fact that we now can’t guarantee full benefits to current retirees is completely unacceptable, and it should be cause enough for every policy maker to rally around solutions to restore solvency to those programs,’ Ms. MacGuineas said.”
Pessimistic Outlook: Voters Demand a Solution
Both Congress and the President are fully aware that Medicare and Social Security are popular among voters, says the Wall Street Journal. However, lawmakers “have been unable to agree on changes to improve their fiscal health.” Various proposals have been put forth to bridge the revenue gap by raising or eliminating what’s often called the payroll tax cap, allowing taxes on earnings above the current limit of $133,000. Other solutions include raising the 6.2 percent payroll tax rate, gradually raising the retirement age, or reducing benefits for wealthier households. President Trump has gone on record during the 2016 campaign that he would not touch so-called entitlement programs like Social Security. Hopefully, this gloomy report from the trustees will bring political adversaries to the table – although given the paralysis affecting much of Washington, we remain skeptical.
Turn Pessimism to Optimism with a Retirement Dashboard and a LifePlan
As we said above, waiting around for Congress to act – or anyone else, for that matter – puts you and your retirement plans at the mercy of others. A far better approach to retirement planning is to meet with a professional financial adviser and prepare what we call a retirement dashboard – a tool that lets you see at a glance how well you’re prepared for your financial future. Your dashboard also allows you to run various “what-if” scenarios so you can determine exactly what the impact might be should the dire predictions of reduced Social Security benefits come to pass. If you’ll contact us at AgingOptions, we’ll put you in touch with a trusted planner who can help you.
We also urge you to accept Rajiv’s invitation to attend a free LifePlanning Seminar. Financial planning is important, but what’s needed to prepare you for retirement is an overarching plan. Will your financial needs be met over the coming five, ten, twenty or more years? Do you have adequate legal protection in place, which is more than a simple will? Is your family fully aware of your hopes and desires as you age and will they be there for you? Have you considered your best options for medical coverage and your best housing plan, so you’re prepared for whatever the future may hold? If this seems like a lot to accomplish, we have terrific news: all these components are part of an AgingOptions LifePlan, a uniquely comprehensive, robust retirement planning strategy. Only AgingOptions offers it.
Why not make it your goal before 2019 gets much farther along to find out more by attending a free LifePlanning Seminar with Rajiv Nagaich? Let Rajiv show you the process and answer all your questions in a lively, information-packed session – then the next steps will be up to you, with no obligation and no pressure. Visit our Live Events page for a current calendar of seminars, and then register for the date of your choice. If you’re pessimistic about your future, it’s time to take charge and to really begin the journey toward the retirement you’ve always dreamed of enjoying. Age on!
(originally reported at www.wsj.com)