“There are a lot of factors leading into this,” says John. “For example, there are roughly 4 million baby boomers retiring a year, and people are living and collecting Social Security for much longer than was ever thought possible.”
It’s understandable than that some Americans are convinced that Social Security won’t be there for them when they retire. But when exactly will Social Security be bankrupt? Could it be sooner than 2034?
“It could theoretically last forever,” says John, “and the easiest way to understand how is to look at where Social Security gets it’s primary funding: payroll taxes. This can get quite complicated, but it largely has to do with the taxation of Social Security benefits (which is a topic in itself) and the generation of interest income from the asset reserves being invested in various securities. As long as Americans continue to work, the payroll tax will ensure that Social Security going bankrupt will not happen.”
“That being said, there is a huge difference between never going broke, and the current payout schedules being sustainable. If the reserves are burned through,the Social Security board of trustees are suggesting a 23% cut to social security stipends to keep the program working.”
John adds, “This is a huge potential issue for retirees, and why everyone should consider doing at least some Social Security planning. A few simple tweaks can be the difference between maintaining or losing a beloved retirement lifestyle. It’s just generally a good thing to do for your family, to try to maximize what is most retirees biggest retirement asset.”
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