The Shaky Future of Social Security: What You Need to Know

The latest report on Social Security has many Americans on edge, as it predicts that the trust fund reserves will run out by 2035. This news has left those nearing retirement wondering how much they can expect in benefits. The report, released by the Social Security and Medicare trustees, projects insolvency one year later than previously estimated, thanks to a strong economy and wage growth.

Despite the potential depletion of the fund, there will still be money to pay benefits, albeit at a reduced rate of 83% of what has been promised to beneficiaries. Without a fix, beneficiaries could see a 17% cut in benefits. Experts are warning that Congress needs to act soon to avoid automatic benefit cuts.

For many Americans, Social Security is a crucial source of income in retirement. About half of seniors rely on it for at least half of their income, and for 1 in 4 seniors, it accounts for 90% of their income. To address the shortfall, several solutions have been proposed, including increasing payroll taxes, raising the retirement age, or lifting the cap on income subject to Social Security tax.

Financial planners are advising their clients to plan for a reduced benefit from Social Security. Many clients are already assuming they won’t receive full benefits and are saving more in other retirement accounts. Experts also recommend delaying claiming Social Security benefits until at least full retirement age, or even later, to maximize monthly payments.

While waiting to claim benefits is ideal for those in good health with other sources of income, some Americans have no choice but to claim early due to physical limitations. Congress has a limited time to address the shortfall faced by millions of Americans who rely on Social Security. The hope is that lawmakers will take action before it’s too late.