Should You File Now Before Social Security Goes Broke?

Social Security Card

 

What about the Future of Social Security ?

Many Americans rely on Social Security retirement benefits. As of December 2012 Social Security provided 40 million workers and their dependents with retirement benefits and six million survivor’s of workers with benefits. Because Social Security is so important, for the last three years the Social Security Administration (SSA) has published the Social Security Trustee Report (www.ssa.gov/oact/trsum) that details the financial status of the fund.

According to the Social Security Administration Trustees Report (May 2013), “Total expenditures have exceeded non-interest income of its combined trust funds since 2010, and the Trustees estimate that Social Security costs will exceed non-interest income throughout the 75-year projection period. The deficit of non-interest income relative to cost was about $49 billion in 2010, $45 billion in 2011, and $55 billion in 2012. The Trustees project that this cash-flow deficit will average about $75 billion between 2013 and 2018 before rising steeply as income growth slows to the sustainable trend rate after the economic recovery is complete and the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers.”

This means that Social Security will have to rely on reserves to fund the deficit. Reserves are expected to be depleted by 2033 (the same year as last year’s report). From 2033 to 2087 tax income is scheduled to be able to pay about three quarters of benefits through 2087. Current Social Security Administration (SSA) projections expect taxable earnings to grow from 11.3 percent in 2007 to about 17 percent in 2037 then slightly decline before increasing after 2050.

Should you apply for Social Security benefits early to make certain that you can claim benefits?

The 2013 Social Security Administration Trustees Report indicates that full benefits can be paid until 2033. In other words, individuals who are currently 65 and live for another 20-years will receive full benefits. Individuals who are now in their 50’s will likely see a reduction in benefits if Social Security does not change. According to the AARP (June 2013) the trustees list three ways of keeping the Social Security program solvent for the next 75-years: (1) implement an increase of 2.66 percent in payroll taxes (any delay will increase the payroll tax increase needed), (2) immediately and permanently lower benefits, (3) implement a combination of payroll tax increases and benefit decreases.

About ksindell

Kathleen Sindell, Ph.D. is the author of numerous academic, popular, and professional finance articles, Web sites, proposals, and books. This includes the bestselling reference book, "Investing Online for Dummies, Eds 1-5" (listed for two consecutive years on the Wall Street Journal's Bestselling Business Book List). Her most recent book "Social Security: Maximize your Benefits" has been listed in Amazon's Top 100 Bestselling Retirement Planning Books. It is important to note that "Social Security: Maximize Your Benefits, 2nd Edition" was just released. Sindell has an in-depth understanding of the financial services industry and has held Series 7, 63, and 65 licenses. Dr. Sindell is regularly tapped as a financial services expert on ABC World News, The Nightly Business Report, and at popular online and print outlets. Kathleen Sindell, Ph.D. is a member of the Board of Directors for the Financial Planning Association, National Capital Area (FPA NCA), is on the Editorial Advisory Panel of the Journal of Financial Planning, and is Co-Chair of the Metro Washington Financial Planning Day. Sindell is a Course Chair II, CFP Program Academic Officer, and adjunct full-professor at the University of Maryland, UMUC, School of Undergraduate Studies. Contact Information: ksindell@kathleensindell.com or 703-299-1700
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