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IS SOCIAL SECURITY RUNNING OUT OF MONEY?

IS SOCIAL SECURITY RUNNING OUT OF MONEY?

IS SOCIAL SECURITY RUNNING OUT OF MONEY?

We have been hearing the doom and gloom stories of the demise of social security for some time now. But how accurate are these daunting predictions? As it turns out, they are more realistic than we would like to believe.

In April of this year, the Social Security Board of Trustees released its annual report. The 260-page report is a laborious read, but as usual, the numbers tell the story. Last year there were 63 million people receiving benefits from Social Security. There are approximately 327 million Americans, so just over one-fifth of the population collects benefits. That part may not be surprising, but if there is an alarming figure in the report, it is this one: The total cost of the program in 2018 was $1,000 billion. Total income was $1,003 billion. As you can see, Social Security is paying out almost as much as it is bringing in.

In their own words, the Trustees’ report offers the bad news: “Social Security’s total cost is projected to be less than its total income in 2019 and higher than its total income in 2020 and all later years. Social Security’s cost has exceeded its non-interest income since 2010. For 2019, program cost is projected to be less than total income by about $1 billion and exceed non-interest income by about $81 billion.”

IS 2034 THE END OF SOCIAL SECURITY?

The prevailing rhetoric about Social Security has been that the funds will run out by 2034. Is that accurate? Yes and no. There are many unknowns that make real projections difficult to formulate. For example, since older people are healthier and living longer, chances are they will be paying into the fund longer. So, before American workers panic, consider this: Even if Congress does nothing to shore up the system by 2034, Social Security will be able to pay out 79 percent of promised benefits until 2090. Congress doing nothing on this issue does not seem likely. Elected officials will surely receive negative feedback from voters if Congress does not do something to bolster funding for Social Security. Americans are likely to get very noisy about this if they lose 21 percent of their benefits, and our elected officials always want to be reelected.

The hard truth is that Social Security only accounts for about 40 percent of your pre-retirement income. That means we have to take responsibility for our own financial well-being, in the form of saving, investing and managing our money. It is estimated the most Americans will need at least 80 percent of their pre-retirement income to maintain their lifestyle after retirement.

Your 401(k) (for those who have one) is a good start. Consider this: If you start contributing the maximum annual amount ($19,000) at age 50, by the time you retire (at age 67) you will have amassed $755,000 bif the annual return is at least seven percent.

The good news? Social Security is not going to run out of money in your lifetime. But everyone needs a saving and investment strategy. JCN Financial and Tax Advisory Services can assist you in making smart financial decisions and ensuring your financial security. Call us at (225) 755-0488 to set up an appointment. It is never too soon or too late to get started.

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