Latest news with #SocialSecurityand
Time Magazine
10 hours ago
- Business
- Time Magazine
Social Security and Medicare Trust Funds Are on Track to Run Out in Less Than a Decade. Here's What to Know
Social Security and Medicare are expected to need to cut monthly benefits in less than a decade as the trust funds for both programs are on track to run dry earlier than previously predicted. A report released on Wednesday from the Social Security and Medicare Boards of Trustees pushed up the programs' go-broke dates, meaning the point at which they would not have enough money to fully cover benefits. The worsening projections are in part because of a new law impacting Social Security and increasing health care costs, according to the report. Here's what to know about the approaching funding cliffs. How long will Social Security stay solvent? The go-broke date for Social Security's trust funds was pushed up to 2034, from last year's estimate of 2035. The funds cover old age and disability recipients. The program covers more than 60 million people in the U.S. What about Medicare? Last year's report set the go-broke date for Medicare's hospital insurance trust fund as 2036. But the latest report pushed up that date to 2033. Medicare is a federal health insurance program that offers coverage for people 65 and older, as well as people with certain disabilities. More than 68 million people in the U.S. are enrolled in the program. The hospital insurance trust fund pays for Medicare Part A, which covers care provided in hospitals and skilled nursing facilities, as well as some in-home care. It also helps pay for hospice care. Why have the go-broke dates moved up? The report largely attributes the Social Security go-broke date being pushed up to a new law, the Social Security Fairness Act, which took effect in January. The law repealed the Windfall Elimination and Government Pension Offset provisions of the Social Security Act, which 'increased projected Social Security benefit levels for some workers' and affected the go-broke date for Social Security's trust funds, according to the report. Last year's expenses for Medicare's hospital insurance trust fund were also greater than initially anticipated, according to the report, which contributed to the go-broke date for the program being pushed up. What happens after the go-broke dates? The funds hitting their go-broke dates doesn't mean that there won't be any funds to cover any benefits after that point. After 2034, Social Security would only have enough funds to cover 81% of benefits. After 2033, Medicare's hospital insurance trust fund would only be able to pay 89% of costs.
Yahoo
04-05-2025
- Business
- Yahoo
How financial advisers are calming clients' fears about the future of Social Security
There's been a striking rise in the number of Americans applying for initial Social Security benefits this year, many earlier than planned. Job losses, rising costs, and even staffing cuts at the Social Security Administration seem to be the triggers prompting more people to claim their benefits. To help clients make the choice that's best for them, financial advisers are stepping in. 'In my planning with clients, I try to keep emotion, political posturing, and media hype out of the conversation and utilize software and resources to educate our folks as to how Social Security works,' Danielle Howard, a certified financial planner with Wealth By Design in Glenwood Springs, Colo., told Yahoo Finance. To recap: You can start receiving your Social Security retirement benefits at age 62. However, you're entitled to full benefits only when you reach your full retirement age, or FRA. For example, if you turn 62 in 2025, your benefit would be roughly 30% lower than it would be at your full retirement age of 67. If you delay benefits from your FRA until age 70, you earn delayed retirement credits. Those come to roughly an 8% increase for each year until you hit 70, when the credits stop accruing. Most people, however, claim earlier, according to the SSA data. Nearly 30% of new Social Security beneficiaries claim benefits at age 62. Around 32% claim benefits after age 62 but before their FRA. Read more: What is the retirement age for Social Security, 401(k), and IRA withdrawals? There is no escaping the fear — real or not — people have of potentially losing their benefits. 'We are hearing anecdotally that more people are claiming Social Security benefits earlier than they had planned because they are concerned Donald Trump and Elon Musk are taking that away,' Nancy Altman, the president of Social Security Works, a group that advocates against cuts to the program, told Yahoo Finance. 'This is very unfortunate because it is best to delay claiming as long as possible if you can, so that you get larger monthly checks for the rest of your life.' It's a decision most folks sweat over. About 3 in 5 workers and more than 4 in 5 retirees have thought about how the age at which they claim Social Security can impact the amount they receive, according to a new report from the nonpartisan Employee Benefit Research Institute (EBRI). Social Security being reduced or ceasing to exist in the future tops the list of retirees' greatest retirement fears, according to a recent Transamerica Center for Retirement Studies report. They aren't wrong to worry, even without the DOGE cuts. The 2024 Social Security and Medicare Trustees Report predicts that the combined retirement and disability trust fund reserves will go broke in 2035. There will still be money to pay benefits at that stage, but without a fix, beneficiaries could see a 17% cut in benefits. That will sting. Most retirees rely on Social Security as their primary source of income. For many retirees or near retirees whom I talked to this week, worries about Social Security's projected funding shortfalls and the program's ability to pay future benefits are top of mind. Some experienced a job loss this year and are stepping into retirement involuntarily because landing a new job just keeps getting harder. The April jobs report revealed that the median duration of unemployment continued to rise, even amid otherwise strong hiring, noted Cory Stahle, Indeed Hiring Lab economist. 'The share of workers who were long-term unemployed (out of work for 27 weeks or more) rose to 23.5% in April, the highest share in three years,' he said. Fears of inflation and shaky stock markets also have Americans in their 60s feeling vulnerable. Many people I spoke to struggling with the decision to apply for benefits said they're leaning toward doing so soon because they want a steady source of income that adjusts each year to keep pace with inflation. As the youngest baby boomers enter retirement and the share of retiree households increases, there is growing concern about their financial health — and claiming early can exacerbate that problem, according to a recent analysis from Georgetown University's Center for Retirement Initiatives. 'Social Security claiming is amongst the most important financial decisions that older households make and can determine not only the income that individuals receive from Social Security but can also potentially influence financial well-being in the years following initial claiming,' according to the authors. Read more: Retirement planning: A step-by-step guide Many financial advisers are donning a therapist cap to counteract client concerns. 'We look at optimizing Social Security as one of their 'buckets' to tap into for cash flow,' Howard said. 'It is important that they understand that Social Security is a hedge against longevity as they can't outlive it.' It is different for each person based on their circumstances, she added, 'but the majority of our planning clients have several buckets of financial assets, and we push Social Security off until 70.' Other planners are in the thick of helping anxious people make the best decision. 'They're worried they won't live that long, and want to enjoy the money now. They're worried that benefits will be cut if they postpone taking it,' Alvin Carlos, a certified financial planner and financial adviser at District Capital Management in Washington, D.C., said. 'For those who can afford to wait, I still think delaying is often the better choice, but I understand the anxiety, especially with all the headlines,' he said. Read more: 5 best questions to ask your financial adviser in the new year How long we're going to live is the great unknown, of course. In case you're wondering, a 65-year-old man is expected to live about 19 more years, and a 65-year-old woman is expected to live about 22 more years. Understanding average life expectancy can help run the numbers to determine whether you really need to turn on Social Security benefits as soon as you can or whether waiting for a bigger check is worth in point: A friend of mine recently told me that her husband has opted to turn on Social Security at age 62. He reasoned that he doesn't expect a long life. His parents only lived into their mid-70s, and he'd rather stop working now, collect his checks, and focus on his art projects. Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including the forthcoming "Retirement Bites: A Gen X Guide to Securing Your Financial Future," "In Control at 50+: How to Succeed in the New World of Work" and "Never Too Old to Get Rich." Follow her on Bluesky. Sign up for the Mind Your Money newsletter
