The Future of Social Security: What You Need to Know
As Americans approach retirement, concerns about the future of Social Security benefits are growing. A recent survey found that 72% of adults worry that Social Security will run out of funding in their lifetime. This concern is particularly prevalent among Gen Xers, who are getting closer to retirement age.
The Impact of the Social Security Fairness Act
President Joe Biden recently signed the Social Security Fairness Act, which will increase benefits for nearly 3 million individuals who also receive public pensions. However, this legislation does not provide a way to fund these extra benefit payments, which means Social Security’s combined funds may last until 2035, at which point only 83% of benefits would be payable.
Addressing the Shortfall
To address the program’s shortfall, Congress may raise taxes, cut benefits, or implement a combination of both. This could influence claiming decisions for all beneficiaries, including those affected by the new legislation.
Claiming Strategies
Social Security retirement benefits are based on a worker’s earnings history and the age at which they claim. Claiming early results in permanently reduced benefits, while waiting until full retirement age or delaying until age 70 can increase benefits. Experts recommend having a higher benefit amount, even if benefit cuts occur in the future.
Preparing for the Future
Individuals in or near retirement may not see imminent changes, but future beneficiaries may face reduced benefits. It’s essential to assess how receiving lower benefits would affect your retirement plan. Social Security is meant to be just one part of a retirement income plan, so having more retirement savings or other assets can help mitigate the impact of potential benefit cuts.
Stress Testing Your Retirement Plan
Experts recommend stress testing your retirement plan to prepare for potential benefit cuts. Consider reducing spending now to avoid having to make more significant reductions later. With over 72.5 million people receiving Social Security and Supplemental Security Income benefits, it’s crucial to plan ahead.
The Benefits of the Social Security Fairness Act
The new law eliminates certain provisions that reduced Social Security benefits for workers who had pensions or disability benefits from work where Social Security payroll taxes were not paid. This change can have a significant impact on beneficiaries, with some couples potentially seeing a lifetime surplus of over $300,000. Even an additional $300 in monthly income can make a big difference in retirement.
Takeaway
If you’re affected by the Social Security Fairness Act, it’s essential to reassess your retirement plan. With the future of Social Security uncertain, it’s crucial to prepare for potential changes and have a comprehensive retirement income plan in place.
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