July/August 2017

Social Security News

The Social Security Administration (SSA) released its 2017 annual trustees’ report.

In contradiction to what you might have heard, we were surprised to learn some good news about social security benefits for social security recipients. And while long-run projections remain concerning, here’s what the report says, and what it all means for you:

  • Social Security programs are earning more than they are spending, so they are saving money.
  • Social Security programs have assets in reserve, so they will be able to continue providing benefits in the near-term.
  • Social Security costs are expected to rise above revenue in the 2020s, meaning programs will spend reserve funds in the next 10 years.
  • If legislators do nothing, and if current projections are correct, reserve funds may be exhausted in the future, and social security benefits will only be able to cover 77% of benefits after 2034.

Social Security in 2017

At the end of 2016, the Social Security Administration was providing benefits to approximately 61 million people, including 44 million retirees (this program also pays disability benefits). During the same period, 171 million people had earnings that paid into the Social Security. In other words, there is a large pool of payers into Social Security programs: approximately 1 in 2 Americans.

Total program expenditures were $922 billion, and total income was $957 billion, meaning the program is earning more than it is spending. This is good news, and in other positive news, the number of assets in reserve grew from $2.813 trillion to $2.848 trillion.

The Future of Social Security Unclear

The immediate health report for Social Security is good, and trustees project it will continue earning more than it spends into the near future (as it has since 1982). Moreover, according to the report, the SSA projects program revenues will exceed costs for at least 10 years. However, as program costs rise in the late 2020s, revenue is not expected to match the rising costs.

If these projections are accurate, the program will eventually begin to operate in a deficit and ultimately spend all its reserve assets by 2034. If this happens, the program will be unable to pay full benefit premiums. In other words, it will have to cut costs by paying out less in social security benefits.

The SSA has suggested that if no changes are made, the program will only be able to pay 77% of benefits after 2034. Lawmakers are looking for alternatives to cutting benefits, such as raising the minimum retirement age, growing the number of social security contributors, or raising funds for the program with various taxes.

Supplementing Social Security Income

With the future of full social security benefits unclear, many seniors are looking for additional sources of income during retirement. There are many options for how to create additional income, and each has its own pros and cons. Considerations for choosing a financial retirement plan include your current income, your income needs, your total savings, your employment benefits, the length of time before you retire, your desire to work during retirement, the tax implications of retirement, and other factors.

In order to navigate these complex and important waters, financial advisors and tax advisors can chart a course for you. To compare financial advisors, and find out what factors matter most when selecting an advisor, check out this free Wall Street Journal guide.