Business Matters: Doomsday predictions for Social Security examined

Social Security and its future have been a topic of widespread speculation among experts for quite some time.

Doomsday forecasters have predicted for years that the Social Security trust fund will run dry well before the last of today’s working adults will get to enjoy the program.

However, as Carissa Miller of Transamerica recently pointed out on our show, fears of Social Security drying up altogether are likely unfounded.

Ms. Miller is a regional Vice President with Transamerica and she works with financial advisors to educate them regarding options and products which will help financial advisors from all over Maryland to assist their clients in obtaining the income their clients need in retirement.

First off, as she pointed out, if you look at the most recent Social Security Trustees’ Report (a copy of which is available here), Social Security has been a pay-as-you-go program for its entire existence.

Indeed, Ms. Miller noted that there is currently sufficient funding coming into the trust fund each year from current workers to keep paying the full benefits promised to today’s retirees until 2034.

In addition, there would be enough remaining in the trust fund to continue paying 72% of promised current benefits between 2034 and 2089 without any changes at all being made to the program.

Only after that would more drastic changes have to be made to the program or would there be any danger of the trust fund running completely dry.

However, as Ms. Miller also pointed out, there also are plenty of changes being considered that could prolong the existence of Social Security as well as its ability to keep paying out benefits to American retirees for years to come.

There has been discussion of increasing the full retirement age for someone born today from the current age of 67 as well as decreasing the cost of living adjustments made to Social Security payments (more commonly known as the COLA) each year.

In addition, there is currently a cap on the amount of earnings which are taxed for Social Security purposes at $118,500; any dollar made over that amount is currently not subject to Social Security taxes.

There has been talk of either adjusting this cap upward or getting rid of it altogether, so that all income is taxed for Social Security purposes. All of these changes would help ensure the long-term solvency of the Social Security system.

As Ms. Miller further explained, the amount of benefits a person can expect to receive from Social Security is tied to their highest 35 years of earnings.

The maximum a person can receive from Social Security today is $2,663, which can add up to $2,000,000 if the person lives to age 100 (assuming a 2.8 percent inflation rate).

The actual amount that an individual will receive from Social Security also is dependent upon when a person chooses to start receiving their benefits.

Currently, a person has three choices as it relates to Social Security: the person can take benefits at 62, take benefits at the full retirement age of 66, or wait and take benefits at the age of 70.  

However, there are consequences if you choose to take Social Security early; the amount of your monthly payments will be approximately 25% less if you take benefits at age 62 versus the current full retirement age of 66.

The converse is also true when it comes to waiting to take benefits until age 70; waiting increases your benefits by 8% per year after you hit your full retirement age.

Therefore, it makes sense to wait as long as possible to delay taking Social Security benefits because the amount of your payment increases the longer you wait to file for benefits.  

As you can see, deciding when to take Social Security is a complex calculation that each individual must go through to decide when to take their Social Security benefits.

It is particularly important to consider what other sources of income you might have in retirement, including your spouse’s Social Security benefits, if applicable.

Because this is such a complex calculation, it is recommended that you consult a financial planning professional who can help you to assess your own individual situation to determine when to take Social Security based on your particular financial situation.

Consulting with an expert will enable you to ensure that you make the most fiscally sound decision as it relates to your Social Security benefits.

You have worked your entire life for those benefits, so there is no sense unintentionally making an ill-informed decision without first consulting a qualified professional regarding this very important issue.

To watch the entire interview, go to

Brian Kuhn CFP® is a financial planner at PSG Clarity in Fulton, Md. Securities offered through Triad Advisors, Member FINRA / SIPC. Advisory Services offered through Planning Solutions Group, LLC. Planning Solutions Group, LLC is not affiliated with Triad Advisors. PSG Clarity is a division of Planning Solutions Group, LLC.

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