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Seniors have relied on Social Security benefits to get them through their retirement years for decades. Whether retirees left work with a hefty savings account or not, Social Security always padded those funds and filled a very real need for seniors in retirement.
However, there’s been a lot of talk within the past few years about the Social Security trust fund diminishing at an alarming rate. In fact, many folks are under the assumption that they’re paying towards benefits that they’ll never see for themselves. Let’s take a look at what the trust fund is, what will happen when the trust fund runs out, and what retirees can expect for themselves.
What Is it and When Will It Run Out?
The Social Security Administration’s trust fund was created in the 80s due to a very real threat to the program’s funding. The trust fund changed the way we approached Social Security and releasing its benefits to seniors. Before, we relied on a simple position of hope that the amount of collected Social Security taxes would equal the payout amount. The trust fund was created to collect and store any moneys left over after all existing payouts were made. The fund itself ballooned from less than $50 billion in the 1980s to almost $2.8 trillion in recent years.
While it seems that the fund is in good shape, looks can be deceiving. Due to the increased number of baby boomers entering retirement, more workers are leaving the workforce than entering it, which will cause the excess money held in the trust fund to start getting depleted. From today through 2019, Social Security’s income from taxes is still expected to exceed its outgoing costs. After that, however, the Social Security Administration will have to begin to draw from the trust fund to pay everyone who needs their benefits. In fact, according to the Social Security Board of Trustee’s most recent report, the trust fund is expected to deplete itself in 2034.
What Will Happen?
While 2034 seems like a long time away, it’s less than 20 years from now. To put it bluntly, this can have an effecton anyone who will already be in retirement or plans to enter it after 2034.
It can even have an impact on those who are gearing up for retirement soon, but planning now for their entire retirement, which will extend past 2034.
As currently projected, there will be a decrease in the outgoing Social Security benefits allocated to seniors after the fund runs out. The good news, however, is that the anticipated tax revenues will be enough to pay for 75% of scheduled benefits. That of course leaves us with the bad news of current and future retirees having to work with 25% less income than those drawing benefits today.
What Can Seniors Do?
With these new projections, we’re looking at a serious decrease in the fixed income benefits that seniors are able to figure into their retirement plans today. An estimated 33% of Americans have no retirement savings, and 23% admit to having less than $10,000 saved. These numbers are scary, especially when they’re stacked up against change in Social Security benefits.
It’s important that seniors take charge of their own retirement futures. The funds that they think will be there for them aren’t exactly promised. While Social Security doesn’t seem to be going anywhere completely, the new changes do bring about a shift in how seniors need to be preparing for their retirement and how much more they need to be saving.
One way that seniors can boost their retirement funds is by selling a life insurance policy that they no longer need or want through a life settlement. Check out our website today for more information about life settlements!