The Truth About Social Security: We Have to Plan for the Unpredictable

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This story is part of So moneyan online community dedicated to financial empowerment and advice, led by CNET Editor at Large and So Money podcast host Farnoosh Torabi.

Social Security is one of the most popular financial search terms on the web right now.

Interest in the topic soared following recent news that current benefits would be adjusted significantly higher for a year rise in the cost of living. And as the midterm elections approach, we hear again how some Republican politicians want to throw these federal benefits on the chopping block.

“This is an ideological battle that has been going on for 85 years,” said William Arnone, CEO of the National Academy of Social Insurance, a nonpartisan organization that aims to educate the public about the benefits of Social Security.

Like many working Americans, I’ve dutifully paid Social Security taxes since my first gig in high school (I hosted a 1950s themed diner). I speak for my generation when I say that if the government decides to take our monthly paychecks from us when we retire — watch out, Uncle Sam. Prepare to see us marching in the streets protesting this theft, walking sticks in tow.

My audience is also baffled by the fate of one of the few social insurance programs in this country. When I asked followers on Instagram to ask me their related questions, I immediately got dozens of questions. Their main concern is about the future of Social Security and what it means for the retirement of this generation and future generations. Here’s how our conversation went.

Why is social security important?

Congress passed the Social Security Act in 1935 during the Great Depression. The program was funded by taxpayer contributions and was designed to meet the financial needs of the aging population and some underprivileged Americans.

There are many misconceptions about Social Security, including that it is a form of welfare, Arnone explained. But in fact, it’s the insurance Americans pay for. Today, 1 in 4 households receives at least 90% of their family income from social security. Along with retirees, Social Security also provides benefits to disabled employees and some relatives of deceased employees.

The median Social Security check is $1,600 per month. It won’t solve all our financial needs, but we need all the support we can get to pay for our retirement.

What is the probability that social security will disappear?

The Social Security Administration says the fund has just enough reserves to pay retirees for the next 13 years. After that, our taxes will only yield about three quarters of the planned distributions. The Biden administration has proposed a plan to lower the cost of living for seniors, including preserving Social Security, but we shouldn’t hold our breath.

While 74% of Americans say Social Security should remain intact, 83% doubt the program will fully survive by the time they retire, according to the Pew Research Center. This skepticism is not unfounded. Arnone told me that Social Security is quite fragile because there is no constitutional protection. “Congress gives and Congress can take it away,” he said.

We can’t help but worry, especially when a recent survey finds that American adults think a “comfortable retirement” now means we have $1.25 million in the bank, and when average retirement savings hit it. have fallen by 11% in the past year .

Are Baby Boomers Guaranteed to Get Social Security?

Current retirees probably have the fewest concerns when it comes to receiving Social Security. Seniors are also due to receive a raise in January, thanks to a cost-of-living adjustment, driving payments up 8.7%. For the average payee, that’s an additional $146 for a total of $1,827 per monthly check. Hopefully, this means your Social Security dollars can maintain their purchasing power at high prices on everything from food to gas and travel. Beneficiaries must be notified of their specific payout rates by post in December. You can also verify your new total on the Social Security website.

If you have yet to reach retirement age but are approaching that day, know that if you wait until age 70 to claim Social Security, your benefit will increase by about 8% per year after you reach full retirement age. (Full pension is 67 for anyone born in 1960 or later.)

Here’s the breakdown of the maximum amount you could get monthly in 2022:

  • Collecting Social Security at age 62: $2,364
  • Collecting Social Security at age 67, or full retirement age: $3,345
  • Collecting Social Security at age 70: $4,194

How Can Generation Xers and Millennials Prepare for Retirement?

Social Security may not fully meet my needs in retirement (hello, out-of-pocket medical expenses!), but it’s not a stupid change either. I ran this quick online calculation and found that I’m on track to collect over $3,000 a month by full retirement age. The same goes for my husband. Knowing this, we’re a little less stressed about investing every extra dime in the stock market. It’s also encouraged us to keep working to maximize our Social Security potential — and have the income to invest ourselves.

Here’s some advice for my Gen X friends born between 1965 and 1980, as well as millennials born between 1981 and 1996: There’s a decent chance Social Security will change in the next decade, so even if we get the benefit, it could amount reduced, or we may not be able to start collecting until later in life, Arnone said.

The more you earn now, the more you pay in taxes and the higher your Social Security salary will be. However, aim to invest at least 10% to 15% of your salary in a retirement plan each year like a 401(k) due to work and/or a Individual retirement account. This way, no matter what happens with Social Security, you’ll have some extra padding.

What happens to the allowances if you retire early?

One listener wanted to know whether working less than 30 years is detrimental to their Social Security income. The short answer is: maybe. How much you earn during your 35 highest earning years plays an integral role in the size of your Social Security salary. If you worked less than 35 years because you took early retirement and didn’t make money or took a number of years off work to care for a family member, those years total $0 earned and can drive down your average Social Security income. Keep that in mind as you are considering taking time off from the workforce.

Read more: It is difficult to recommend stay-at-home parenting. This is why

Is there any hope of Social Security for Generation Z?

A lot of my audience is concerned that Social Security will go the way of Blockbuster and just become a remnant of Grandma’s life. I hope not. Future generations may need this support even more as life expectancy grows and pensions become obsolete, Arnone said. He hopes Gen Zers will advocate for it and see it as a crucial financial lifeline for the elderly. When I asked him what kind of advice he would give, he said, “You need this… Keep it in mind in your planning. Don’t ignore it.”

My hope for Gen Z is that they continue to benefit from their unprecedented access to financial literacy online. They should push for systemic changes and laws that can make life more affordable, but they should not wait to invest in their future. This means negotiate for more incomeavoiding the credit card debt cycle as best they can and work hard to secure their financial independence. I am optimistic that Gen Z will be one of the most informed and inspired generations to date. If they push to keep Social Security, that’s the icing on the cake.

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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