Many people worry about the future of Social Security and whether their benefits will be there when they retire. Polls show low confidence in the program’s future, with a majority of adults concerned about its funding running out in their lifetime. Gen Xers, in particular, are worried about the program’s future as they near retirement age.
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 did not provide a way to fund the extra benefit payments, leading to a shorter timeline for when Social Security can pay full benefits.
Social Security trustees projected that the program’s funds may last until 2035, with 83% of benefits payable. The recent changes have brought that date six months closer, according to estimates from the Congressional Budget Office.
To address the program’s shortfall, Congress may need to raise taxes, cut benefits, or use a combination of both. These potential changes may impact claiming decisions for all beneficiaries, including those affected by the new legislation.
Now is the time to ‘stress test’ your plan
Social Security retirement benefits are based on a worker’s earnings history and the age at which they claim. Waiting until full retirement age will result in receiving 100% of the benefits earned, while delaying further can lead to an 8% benefit boost for every year past full retirement age.
Experts recommend having a higher benefit amount to help offset potential future benefit cuts. While uncertainty remains about how benefits may change in the future, it is essential to evaluate how reduced benefits could impact your retirement plan.
Social Security is just one part of a retirement income plan, so having additional savings or assets can provide a buffer in case of benefit cuts. Saving more now can help prepare for any uncertainties that may arise.
If new law affects you, ‘take a fresh look’ at your plan
The recently enacted Social Security Fairness Act benefits nearly 3 million individuals, with implications that may extend to their families. The law eliminates provisions that previously reduced benefits for certain workers, potentially leading to significant increases in benefits for affected individuals.
These changes can have a substantial impact on retirement funding, with some couples potentially seeing a lifetime surplus of over $300,000 once offsets are eliminated. It is important for those affected by the changes to reassess their retirement plans and consider how the new law may impact their financial future.
