Social Security Worries
Worried about the future of Social Security? You're far from alone. The Social Security Administration itself has said that unless something is done to reform the system, it will burn through its funds within the next few decades. Less talked about, perhaps, is the concern about the present: the program is having a hard time paying its bills.
In 2010, the Social Security Administration collected less revenue in taxes than it needed to cover its benefit payments -- the first time expenditures have exceeded income since 1983. As a result, the program had to tap its $2.5 trillion trust fund, sooner than some had expected. The same is expected to happen this year. "The depth of the recession has slowed down revenues to the system," say Eugene Steuerle, an economist with the Urban Institute, a non-partisan think tank in Washington, D.C.
A Social Security spokeswoman points out that interest income from the Treasury bonds held in the trust fund will allow it to keep growing until 2022 -- even if the agency has to siphon off some money to offset any shortages in tax revenue -- and won't be exhausted until 2036, when the first Gen Xers begin retiring. But that's already one year earlier than previous projections. After that, the agency says tax income under the current system will only cover about 75% of benefit payments through 2085.
For those who depend on Social Security as their only source of income, this can be frightening. Most of the seniors we meet with are already experiencing the struggles that come with their Social Security benefits and worry about paying just their standard monthly bills. Many seniors at this point must contemplate whether selling their home would be in their best interest and move in with a family member to cut costs. A Reverse Mortgage can allow someone in this exact situation remain in their home, give them an extra cushion in their pocket and prevent them from living month-to-month in fear of not being able to pay their bills.
Most people within ten years of age 62 have already started doing the Social Security math problem: How much do I get if I wait one year to take payments? How much if I wait two years? To get the biggest bump in benefits, workers have to delay their benefits beyond full retirement age -- around 66 for people born before 1957, closer to 67 for people born after. (To find your exact date, see Social Security Online http://www.socialsecurity.gov/retire2/agereduction.htm.) For every additional year you wait, you'll get an 8% increase in payments until you hit age 70. Someone who earned, on average, $50,000 per year over their working life would get $1,900 per month at 66, but $2,505 if he waited until age 70 -- a 32% boost. "You'll get a bigger benefit amount for the rest of your life," says Dennis Marvin, a financial planner in Cleveland.
If you've already started collecting benefits and you're under full retirement age, it's not too late to get a raise. One strategy: Go back to work. If you earn more than $14,160, the Social Security Administration will dock $1 in benefits for every $2 you earn. But once you reach full retirement age, your benefits will be recalculated to account for the money you didn't get while working. So, for example, someone who took their benefits at 62 -- at a 25% reduction compared to full benefits -- but went back to work from ages 63 to 66 and earned enough to zero out his entire Social Security check could end up collecting close to full benefits at age 66.
Written By: Rick Underwood
Date: 1/2/2020