Cover Story: Social Security. Its history and future.
Last week, Senators Elizabeth Warren and Bernie Moreno proposed a bipartisan bill that aims to “save” social security.
They want to remove the earnings cap on wages taxed for social security.
The reason for the legislation?…experts have run the numbers and now speculate that social security will become insolvent by the year 2032.
In today’s cover story, Matt Stone takes a look at the history of social security and if it will still be around for our children in the years to come.
“Boomers are taking more money out than we’re going to have going in. What are we doing? Basically we’ve done nothing,” said financial advisor Chris Mediate.
He’s wondering what the future holds for what millions of Americans rely on for their retirement…social security.
President Franklin D. Roosevelt signed the Social Security Act into law in 1935.
It was designed to pay retired workers age 65 or older a continuing income after retirement.
That’s when we all started to get a social security number.
The government has been taking a little bit out of your paycheck to pay for that program ever since.
There’s been little changes over the years. For instance, you can take it at age 62 but receive a bit less per month than you would later.
“Everybody wants to say take it at 62 because it might not be there or you’ll pass away or you hear wait until 70 because that’s when you get the biggest benefit. The truth of the matter is it comes down to your situation. Make sure you’re answering the questions and checking the boxes,” said Mediate.
The longer you wait the better because you get an extra 8% per year if you do, maxing out at 70.
Recently, there’s been some alarm that social security will soon run out. Experts don’t think there’s cause for great concern
“Social security is going to be here. The question people need to ask is how much is my benefit going to be here,” added Mediate.
If it went bankrupt, Mediate says we’d probably see a 25% reduction in everyone’s payout.
But would congress let that happen?
“Those numbers are assuming congress does nothing to change that. My personal opinion is we have multiple elections until 2032. It will be a topic of discussion during elections so that Congress will change something so that that insolvency date gets pushed back many years,” said Kelcie Schiraldi, Bury Financial Group.
What could be changed? Right now, there’s a cap. People only pay social security taxes on their first $180,000 of income.
“If they changed that number from $180,000 to $300,000 that would push the insolvency date out to 2058. That change alone!” said Schiraldi.
And that is part of the Warren-Moreno legislation.
But to be safe, financial experts tell young people to plan now by not relying on social security to be your only source of retirement.
“It’s pretty easy for people to have 401k balances of $300,000-$500,000 with only contributing small amounts, maybe $40-$50 per pay starting at a young age,” added Schiraldi.
Will lawmakers wait until the last minute? If the math is right, they have six years to pass something to make sure your social security is safe.