If you are currently receiving Social Security retirement benefits and it is a big part of your retirement income, congratulations! You are the second or possibly third generation that has benefited from what was initially an excellent plan for workers in our country.
If you are part of the generation that is 45 to 55 years old today, this benefit will be much different for you. Under current law, people in this generation have had their retirement age estimator benefits changed to keep up with the demand for benefits currently burdening our Social Security system. We have fewer workers paying into the system than earlier generations due to an aging population, lower birthrate, and other economic factors. Those that are paying into social security now are benefitting those individuals receiving benefits currently; the money is not kept in an account for you for when you retire. Secondly, social security tax collected now also benefits Medicare recipients.
The Social Security website’s Retirement Estimator is for those who are applying for or receiving benefits. For those who are not in that group, the ssa.gov website page provides the following disclosure and direction to another estimator calculator:
We can’t provide your actual benefit amount until you apply for benefits. And that amount may differ from the estimates provided because:
- Your earnings may increase or decrease in the future.
- After you start receiving benefits, they will be adjusted for cost-of-living increases.
- Your estimated benefits are based on current law. The law governing benefit amounts may change because, by 2034, the payroll taxes collected will be enough to pay only about 77 cents for each dollar of scheduled benefits.
- Your benefit amount may be affected by military service, railroad employment or pensions earned through work on which you did not pay Social Security tax.
So what can you do regarding your retirement benefits possibly being decreased when you retire? Do not include it as part of your retirement income. Plan to make up the difference through other investment options and account types. If you receive your anticipated Social Security Retirement benefit you will have more retirement income than you planned.
I can provide you with a plan that includes additional options to offset the shortage, which is estimated to be 25% less in the future compared to the generation currently receiving benefit payments. For further information on updates to Social Security, familiarize yourself with the Board of Trustees 2017 Report and the Social Security Administration website.