Navigating Social Security Trust Fund Uncertainty

Social Security: Headlines vs. Reality
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In recent times, there has been a lot of buzz around the future of Social Security, with headlines often painting a dire picture.  As an example, this recent headline from CNBC:  

​While it's true that the Social Security trust fund faces challenges, it's important to look beyond the sensational headlines and understand the full context.

The media often highlights the potential depletion of the Social Security trust fund, which can understandably cause concern among the public. These headlines are designed to grab attention and spark conversations, but they don't always provide the complete picture. It's crucial to delve deeper into the issue to understand what it really means for Social Security recipients.

Even if the trust fund were to run dry, it doesn't mean that Social Security benefits would disappear entirely. The program is funded through payroll taxes, which means that as long as people are working and paying Social Security taxes, there will be money available to support benefits at some level. While the benefits might be reduced, they won't vanish completely.

According to the 2025 Social Security Trustees' Report, the Old-Age and Survivors Insurance (OASI) trust fund is projected to become insolvent by 2033. At that point, retirees would face an automatic 23% benefit cut.  If the OASI trust fund borrows from the Disability Insurance (DI) trust fund, the combined funds would be depleted by 2034, leading to a 19% benefit cut.

This is not a great outcome and would certainly negatively affect millions of Americans living on a fixed income and primarily relying on Social Security.  This situation underscores the urgency for policymakers to find solutions to ensure the long-term viability of Social Security. 
 
In my opinion, politicians will step up at the last minute with a higher Social Security tax on working Americans, they will likely move the full retirement age for Americans at least ten years from retirement to age 70 and possibly remove the wage cap on such taxes (currently $176,100 in 2025).  Note there is no wage cap for the Medicare Tax component, which will likely serve as the model.  All covered wages are subject to the Medicare tax, which is 1.45% for both the employer and employee. Additionally, an extra 0.9% Medicare tax applies to earnings above $200,000 for single filers or $250,000 for married couples filing jointly
 
This will not a very popular decision for policymakers, hence the last-minute theatrics, and will likely lead to some angry voters come election day, especially among the working Americans who will feel disenfranchised saving the many retired Americans who cannot live without Social Security.
 
However, if you are working, why would you want to leave this all to chance? 
 
It is not too late to plan and set yourself up for a confident retirement, here are a few steps you can take:

• Save or save more for retirement now on your own or through your employer's retirement plan.
• Map out your retirement goals, needs, and steps to success in a comprehensive plan so you are confident of your need, current and prospective resources and the gap you may or may not need to fill.
• Stress test your plan.  There is no better way to find peace of mind than to know your plan can stand a substantial decrease in benefits or the possible implications of increased taxes on your income should you still be working.
• Seek help with investment questions and plan to ensure you're making informed decisions.

 
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