Receiving Social Security checks is a common goal for millions of Americans looking to enjoy their retirement years. By consistently contributing to the Social Security Administration (SSA), people gain trust in the system and wait for the necessary conditions to be met before retiring. Unfortunately, this goal will become more difficult to attain as time passes.
Long ago, retirement was something that people could genuinely strive for. However, times have changed, and relying solely on Social Security benefits may not appear as prudent as it did 30 years ago.
Not only is the current economy putting a strain on the system, but its future is dependent on the policies implemented by the incoming president in accordance with his principles. As a result, current and prospective system beneficiaries are undoubtedly concerned about what will happen to the SSA over the next ten years.
Why can you face cuts to your Social Security checks?
To understand the current issues that may impede your Social Security checks, you must first go back to the beginning and thoroughly examine the origins of the Social Security System. The SSA’s main goal began in 1935, when it was established to provide older Americans with a monthly stipend to help them survive in their golden years.
The main idea is that by collecting a set amount of money from the working population, they can fund the payments, lowering the costs that the federal government would incur by implementing welfare programs.
The retirement program, like any other insurance system, was designed to be financially sustainable by relying on a large number of people to contribute the funds needed to support payments to a much smaller number of beneficiaries.
As a result, by deducting a small fraction of existing recipients’ earnings (also known as Social Security Taxes) and taxing their benefits as part of their tax income, the system would be able to sustain itself and invest the money, allowing it to distribute Social Security checks solely via returns.
Unfortunately, the Baby Boomer effect only occurred once in the last century, and the birth rate increase was brief. In contrast, the number of births has been steadily declining over the years. Straining the base of Social Security payments and illustrating the possibility of a global cash shortage.
This is not just speculation; the SSA has forecast that it will run out of cash to pay retirement benefits by 2033, which could be pushed back to 2035 if the disability insurance fund’s assets are depleted as well.
This means that the funds’ principal must be used to pay Social Security checks rather than just the returns, and any shortfall will inevitably require money from the federal budget and, as a result, taxes paid by the public.
In light of this situation, strategies for restoring the sustainability of SSA benefits will include reducing them, increasing contribution levels, or making them more difficult to obtain. Those who have not yet retired will be hit the hardest because collecting Social Security checks will become more difficult in the long run.
What can you reasonably do to prevent the cuts to your Social Security checks?
To be honest, there is little you can do to ensure that the SSA remains viable in the face of potential cuts in the coming years, and thus secure your Social Security benefits. However, you can plan ahead of time to maximize your retirement benefits.
The simplest way to accomplish this is to postpone retirement as long as possible, increase your contributions, review your employment history to ensure there are no errors, and strengthen alternative saving options like a Roth IRA or 401(k).
