Why is everyone so concerned about Social Security?

While many seniors rely heavily on Social Security to make ends meet, a large number of people have lost confidence in the program. A good 73% of working Americans think Social Security won’t be there for them when they retire, according to the 21st Annual Transamerica Retirement Survey. But those who think so may be blowing the current situation out of proportion.

What will happen to social security?

The Social Security Trustees recently released their long-awaited update on the state of the program’s finances, and the news wasn’t exactly great. It wasn’t shocking either.

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It’s no secret that Social Security will owe more money in benefits than it receives in income in the coming years, as baby boomers leave the workforce en masse and there aren’t enough replacements to make up for it. In that scenario, Social Security will have to tap into its trust funds to keep track of the planned benefits. But once those trust funds dry up, distributions are on the table.

Before the coronavirus crisis began, Social Security administrators estimated that the program’s trust funds would run out of money by 2035. Now they say that milestone will arrive a year early because of the widespread unemployment crisis that sparked the pandemic. Once those trust funds are exhausted, Social Security recipients can look at a 22% reduction in their benefits. This applies to both current and future beneficiaries.

Interestingly, the aforementioned Transamerica survey was compiled and released before the Trustees released their final report. But the number of workers who now think Social Security won’t be there for them when they retire could be even higher.

It’s not all doom and gloom

It is clear that cuts in social security are not desirable. But there is also a big difference between the bankruptcy of Social Security and the program to reduce benefits. The first is not on the table, which means that current and future retirees will still receive some money every month.

In addition, while benefits reductions are possible, they are not set in stone. Lowering benefits could put millions of seniors in a very precarious financial situation, so lawmakers tend to try to find ways to avoid that scenario.

Of course, current retirees may have few options to offset Social Security cuts. But if you’re still working, you should worry a little less.

For starters, you may have many years ahead of you to increase your personal retirement savings so that you are less dependent on Social Security during your senior years. You may also have the option to defer your application, which can give you a larger monthly benefit for life.

While the latest Social Security news may not be something to celebrate, the fear of the program disappearing completely is quite exaggerated. As long as we continue to tax workers’ income for Social Security purposes, seniors will be able to collect benefits to some extent. And given the ramifications of cutting benefits, lawmakers are quite invested in finding solutions to prevent this from happening in the short term.