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Will Social Security run out?

Yes and no. To answer this question and explain it fully, we must first understand what Social Security is, its various benefits, and how it receives funding.

What is Social Security?

FDR enacted the Social Security Act in 1935 as part of the New Deal program. It provides workers with a guaranteed lifetime pension upon reaching a certain age. It also provides social payments to America’s most vulnerable populations, such as the disabled. Social Security benefits recipients today receive tax money from those still working through automatic payroll deductions. About 2.8 workers are paying into Social Security benefits for every retired American. Any surpluses go into a Trust Fund for future payouts.

What benefits does Social Security provide?

Besides providing beneficiaries with monthly payouts, Social Security benefits include disability benefits, survivor’s benefits, and supplemental security income. These payments help ensure that recipients can make ends meet and reduce their vulnerability to life on the street or unchecked poverty.
Social Security Disability Payments
Americans that are unable to work receive disability payments as long as they are below full retirement age and their disability is not a short-term one. The monthly social security payment depends on one’s previous salary. It also comes with the caveat that the beneficiary has worked for a certain amount of years prior to becoming disabled.
Social Security Survivors Benefits
Widows and widowers of workers and retirees can receive additional social security benefits apart from their standard benefits upon the death of their spouse, as long as that spouse had been putting into the Social Security program. The survivor must be 60 or older (50 in case of disability) to start receiving Social Security Survivors Benefits. The payout depends on the age of death and income of the deceased. In some cases, children can also receive survivor’s benefits.
Social Security Supplemental Security Income (SSI)
SSI is for those who are disabled, blind, or over 65 years old and unable to earn a livable wage. Unlike standard Social Security retirement payments, SSI does not depend on one’s working history or the working history of a family. It is also funded independently and not by regular Social Security taxation means. Children with disabilities may also qualify for SSI Social Security benefits.

When should I start taking social security benefits?

There is a multitude of factors that affect your decision on when to start taking social security benefits. The longer you delay receiving social security benefits, the more you will get when you are older. The earliest you can obtain them is 62, but you will only get 70% of the social security benefit. At 65, you can get 100% of the scheduled Social Security payment. If you wait until you are 70 years old, you can max out at 132%
It usually makes sense to delay taking social security as long as possible.
But there are times when it may make sense to start taking them early. A series of poor market returns in the five years heading into retirement or the first five years of retirement can deal a considerable blow to your portfolio. This scenario is called the sequence of return risk. If your portfolio is at a sequence of return risk, you may want to pull from social security earlier to give your portfolio time to recover.
Need to sign up for medicare or social security? You can click here to fill out an online form.
Where can I find social security offices near me?

Will Social Security go bankrupt?

As long as payroll taxes continue to go into social security, it is impossible to go “bankrupt.” It may be confusing because we often hear stories or read headlines promising that social security will eventually go belly up as soon as 2034.
People who make such claims may fail to understand fully Social Security’s complexities. Even worse, they may be deliberately misleading you. What is really happening is that ONE Social Security Trust is set to run out in 2034.
But NOT both trusts.
Yes, Social Security actually has two trusts, the Old-Age and Survivors Insurance (OASI) trust fund, and the Disability Insurance (DI) trust fund. The OASI fund is the larger of them, and it is the one set to go bankrupt in 2034 if Congress doesn’t take action. The smaller DI trust fund will last at least another 75 years. From 1983 until 2021, Social Security operated at a surplus. In 2021, the OASI paid out more than it received and will continue to do so until 2034.
As things stand, Social Security benefits will pay out 80% of scheduled benefits from 2035, assuming Congress doesn’t pass new legislation. You don’t have to worry about not receiving social security, but you should start planning now to bridge the gap between lost social security income and your retirement needs.
We can review your plan and determine how a 20% reduction will affect your portfolio and retirement readiness.
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About the Author

  • Douglas Walters

    Doug is the Managing Partner of Walters Strategic Partners, LLC, a licensed Registered Investment Advisory firm. Doug is a licensed Certified Public Accountant (CPA) in the state of Florida and holds a Series 65 Investment Advisor Representative securities license. He is also a member of the AICPA. With over 28 years of experience as a CPA, he believes investment decisions should be based on decades of peer-reviewed research rather than relying on the latest “hot tip” from media outlets. This empirical evidence puts the science of investing to work for his clients.

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