Robert
Powell, Special to USA TODAY Published 6:01 a.m. ET Sept.
30, 2019 | Updated 12:38 p.m. ET Sept. 30, 2019
With a rapidly growing aging population, securing Social
Security funds is now more crucial than ever. But how did we get here in the
first place? Just the FAQs, USA TODAY
Did you know that some 5.6 million people were
newly awarded Social Security benefits in 2018?
Fifty-five percent of them were retired
workers, 12% were disabled workers and 33% were survivors or the spouses
and children of retired or disabled workers.
And those are just some of the tidbits of
information in the newly released booklet from the Social Security
Administration, Fast Facts & Figures About
Social Security, 2019.
What else is noteworthy?
COLA is key
There are few sources of inflation-adjusted,
guaranteed-for-life income, but Social Security is one such source. In
2019, the cost-of-living adjustment
(COLA) for Social Security benefits was 2.8%.
“It sounds insignificant, but it's huge,” says
Andy Landis, author of "Social Security: The Inside Story."
Cars under $30K: Don't miss these 12 upcoming new
cars, SUVs
Come here, car: Tesla owners test new feature
enabling self-driving capability in private parking lots
“Your Social Security payments are
inflation-proof, with an annual raise equal to the consumer price index or
CPI," he says. "Compound that over a 20-30-year retirement, and your
seemingly-modest Social Security can become your biggest income source.”
What's the average benefit?
COLAs are important. But Social Security was
never meant to be a person’s primary source of income in retirement, say
experts.
Joseph Stenken, an advanced products
consultant for Ameritas, a Lincoln, Nebraska-based financial services company,
says the current maximum monthly benefit of $2,861, or $34,332 a year, should
be a reminder for pre-retirees of how much (or how little) Social Security is
available for them in retirement.
An even bigger reminder? Most beneficiaries
receive far less than the maximum monthly benefit. Consider this: The estimated
average monthly Social Security benefit payable in January 2019 was $1,461
for all retired workers, $2,448 for a couple both receiving benefits and
$1,386 for a widow or widower. And this suggests, says Stenken, “that someone
relying solely on Social Security for retirement income could be looking at a
tough retirement financially.”
A tectonic shift is underway
Men historically had been the bigger if not
only breadwinner in a household and were more likely than women to receive Social
Security under their own work record. But the gender gap is shrinking.
According to the booklet, the proportion of men who will receive Social
Security under their own work record declined slightly from 93% in 1970 to 90%
2018 while the proportion of women who have worked enough to receive Social
Security under their own work record increased dramatically — from 63% in 1970
to 86% in 2018.
This represents “a tectonic revolution” in
work and retirement, says Landis.
“In past decades, women made up a minority of
workers getting their ‘own’ Social Security, as opposed to a spousal
payment," Landis says. "Now women are a full 50% of ‘retired
worker’ beneficiaries. Women have independently earned their own Social
Security protection and payments.”
That doesn't mean that spousal payments are
obsolete. “Nearly every couple has a higher and a lower earner,” says Landis.
“Spousal payments establish a floor payment level even for the lower earner in
a couple.”
It's time for a Social Security fix
Social Security is not sustainable over the
long term at current benefit and tax rates, according to the booklet. Among
other facts and figures, the booklet notes that in 2010, the program paid more
in benefits and expenses than it collected in taxes and other noninterest
income. And the 2019 Social Security Trustees report projects this pattern to
continue for the next 75 years.
What’s more, the Trustees estimate that Social
Security’s trust fund reserves will be depleted by 2035. At that point, payroll
taxes and other income will flow into the fund but will be sufficient to pay
only about 80% of program costs.
Jim Blankenship, author
of "A Social Security Owner’s Manual," finds some comfort in those
projections.
“The outlook is just a bit better than it's
been in recent years,” he says. “Now we're looking at a depletion in 2035
versus 2033 and the projection is that 80% of benefits would be paid thereafter
if nothing changes. It has been 75% or lower.”
Others, however, see problems on the horizon.
“Demographically, we simply have more older
retirees and fewer younger workers," says Landis. "That means we need
to increase Social Security income through taxes, and/or decreased payouts in
benefits.”
The ratio of 2.8 workers paying Social
Security taxes to each person collecting benefits in 2018 will fall to 2.2 to 1
in 2036.
For his part, Landis says Congress needs to
close the funding gap.
Robert Powell is the editor of TheStreet’s
Retirement Daily www.retirement.thestreet.com and contributes regularly to USA
TODAY. Got questions about money? Email Bob at rpowell@allthingsretirement.com.
No comments:
Post a Comment