In our practice we work with many Social Security recipients. As part of estate and special needs planning, we are always considering the impact of social security income on the client’s plan. This week I thought we would take a closer look at Social Security Programs. There has been a lot of concern about the sustainability of the program and with the Covid 19 pandemic people may be even more concerned. April 22, 2020 the Trustees of the Social Security and Medicare Trust Funds released their Annual Report.
First, who is receiving Social Security?
In 2020, about 65 million Americans will receive over one trillion dollars in Social Security benefits.
Snapshot of a Month: December 2019 Beneficiary Data –
- Retired workers 45 million $67.7 billion $1,503 average monthly benefit
- dependents 3.1 million $2.4 billion
- Disabled workers 8.4 million $10.5 billion
- dependents 1.5 million $0.6 billion
- $1,258 average monthly benefit
- Survivors 6 million $7 billion
Second, What Programs Does Social Security Provide?
These are the four main programs for person’s worked and contributed to Social Security:
- Old Age (their term not mine)- this is what we think of as the retirement income.
- Survivors- this is the program for widowers and surviving dependents of workers who received benefits.
- Disability Insurance- the program designed to pay disabled workers who worked at jobs contributing to the program and the person meets the definition for disability.
SSA has many more programs but these are the major work-related programs.
Is Social Security Sustainable?
The short answer appears to be no it is not, at least not with current plan for administration. However, that is not actually the answer. Every year the Trustees use multiple models to make projections on the sustainability of all programs. Both programs currently have a positive balance so that is good news. The bad news is they are being depleted and not replenished at the same rate.
Figure II.D2.—OASDI Income, Cost, and Expenditures as Percentages of Taxable Payroll [Under intermediate assumptions]
Rough projections are that if nothing is done the trust funds will be depleted by 2035. Congress knows how important this program is to the financial ability of the United States and will likely to action to protect the program. Indeed, over the years Congress has made changes to Social Security programs.
What Options Are Being Considered?
Fortunately, lawmakers have many policy options that would reduce or eliminate the long-term financing shortfalls in Social Security. There are many options being considered. Here are just a few.
- Delay the retirement age at which people can begin withdrawing their full benefit.
- Percentage reduction in benefits to bring amount paid out closer to tax revenue.
- Increase payroll taxes either an overall increase for employers and employees and/or raise or remove the ceiling on taxable income.
- Encouraging programs that increase individual saving for retirement.
The Social Security program it is a critical part of financially planning for most Americans. It is important to stay informed and to be part of the conversation about the future of the programs. I hope this gave you a start on engaging in the conversation. To keep it going below are some resources. Check back on the firm FaceBook page for our regular postings on Social Security.
You can read the full 2020 OASDI Trustees Report HERE
Or, for basic facts about Social Security click HERE
Written by: Jennifer Kupiszewski, Esq.