Many of us are pretty familiar with the concept of Social Security. Webster defines it as: “a federal system of old-age, unemployment, or disability insurance for various categories of employed and dependent persons, financed by a fund maintained jointly by employees, employers and the government.” For most of us, it’s simply a government-run plan meant to help us in retirement. But how does it work? Here’s a rather simple explanation …
O.K., the big question—will Social Security be around when you’re ready to retire? Opinions vary, depending on your age today. Some experts say the program will be in the red in a few short years, and the system’s trust fund will run dry in 2037. At that point, Social security would be able to pay out only about three-fourths of its promised benefits … through 2083.
What can be done to prolong the system? Experts like MSN Money say there are chiefly two ways to ensure longevity to a failing system like Social Security, and neither is very pleasant.
One way is benefit cuts. With Americans living longer than they were when the program was created in 1935, they’re drawing more benefits over their lifetimes. One way of reducing benefits has been to raise the retirement age. The American Academy of Actuaries has said that gradually raising retirement age by two months per year from 67 to 70 could take care of about half of the long-term deficit.
Deep breath … tax increases. Yep, that’s another solution, with raising payroll taxes or creating a new tax dedicated to Social Security as two options.
While the idea of Social Security may seem simple, the reality of a system in a financial squeeze is multi-layered. For more in-depth Social Security information, visit the website of the Social Security Administration.
Did You Know?
How’s your retirement plan going?
If your “retirement stool” doesn’t have three legs, it should at least have two. Schedule a complimentary financial analysis with our Vantage Investment Services Group. We can help set you on the right course to retirement.
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