Despite what you may have heard, Social Security is not going to run out of money for the next decade. But under the current system, the program’s reserve trust funds are expected to be exhausted by 2035, meaning that its main source of funding – payroll taxes – will cover only about 78% of benefits in subsequent years.
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This likely means that younger people working today will see a reduction in Social Security benefits compared to what is being paid today. As previously reported by GOBankingRates, if you are under 45, you can expect to see your Social Security benefits reduced by 10% to 15% from current levels. That percentage drops to 5% for 45 to 60-year-olds.
If you want to get an idea of what your monthly Social Security payment might be when you sign up for retirement benefits, the Social Security Administration offers some resources on its website. However, these are based on current Social Security funding and do not take into account potential road cuts. For that, you can check out third-party calculators for free.
As CNBC reported, one of those calculators is offered by Covisum, a provider of Social Security claiming software. It recently updated its calculator to reflect the latest projections from Social Security administrators — including a free version for consumers and a more complex paid version for financial advisors.
With the free version you can calculate, among other things, the effect of a 22% reduction on the benefit from 2035 and the effect of no reduction on your benefit. This applies to different scenarios when you plan to retire.
If you want to use the SSA’s free tools, a good first step is to create a My Social Security account online. With this account, you can verify your career earnings, get your Social Security statement, and access various calculators to help you plan for the future.
The calculators can help you estimate retirement benefits at age 62, full retirement age (66 or 67, depending on your date of birth), and age 70. Theoretically, you could take that figure and then reduce the amount by 5% to 15% from the beginning in 2035.
You can also view retirement benefit estimates by:
Choose a future age to receive retirement benefits in years and months or use the “Age” slider.
Choose a future date to receive retirement benefits
Enter the average annual income you expect to earn until retirement
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Another option is to use the SSA Quick Calculator, which provides benefit estimates based on information you provide, such as your date of birth, income in the current year, and expected retirement date.
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This article originally appeared on GOBankingRates.com: Social Security: Free Calculators Help You Plan Ahead for Program Cuts – How They Work