We have all heard the whispers and rumors regarding Social Security benefits and the reform of the current Social Security system. Analysts are saying that the system will run out of money eventually. When will this happen, and where does that leave those of us who have paid into the system if Social Security goes bankrupt before we retire? What happens to those who are currently receiving Social Security Disability and retirement benefits if the Social Security Administration (SSA) goes broke? While there is no doubt that the Social Security system is in trouble and there is definitely some cause for concern, understanding the facts can help you prepare for the future of Social Security and will help you understand why you should not yet panic.
What is the Time Line?
Depending on who you ask, there are varying opinions as to when the Social Security system will go broke. Some people say it will be this year, others insist that there is nothing to worry about until 2017 at the earliest. There are still others who say that Social Security will always be there because politicians know that the benefits are too important and are not willing to rock the boat when it comes to the checks generated by the SSA.
Who's right and who's wrong? There is no real right answer as of now. Social Security benefits will definitely be affected at some point in the future. We have all seen the beginnings of this in recent news. Cost of living increases are no longer being provided to Social Security recipients. The retirement age for full Social Security retirement benefits is now 67 instead of 65. Is this an indication of future changes? Will you be able to obtain Social Security Disability or retirement benefits if you need them in the future? The answers to these questions may not be as daunting as you think.
Focusing on the Facts
Yes, the Social Security system does need an overhaul, but it is not nearly as dire or bleak as some people are trying to make us believe. Currently, the Social Security system is still bringing in more money from taxes than it is paying out. That makes it hard to believe that the system will be going bankrupt this year or even the next. In fact, it will be 2016 before the benefits that are being paid out by the SSA will begin to exceed the amount collected in taxes.
What happens once the amount the SSA receives is less than what is being paid out? Many analysts agree that by 2037, if changes aren't made, the Social Security trust fund will be emptied. The amount collected in payroll taxes will only be enough to pay just a little more than 70 percent of the benefits that will be owed at that time. Does this mean that Social Security benefits will be completely unavailable? No, but it may mean that benefits could be cut by as much as 30 percent if measures aren't taken to fix a broken system.
So where is the future of Social Security headed? That really depends on the steps that are taken in the coming years. Some say privatization. Others say reform. There are those who call for cutbacks. There is no doubt that there is change for Social Security on the horizon, but exactly how that change will manifest is still unclear.