Latest news with #TrusteesReport
Yahoo
14-07-2025
- Business
- Yahoo
Social Security's Financial Outlook Just Got Worse -- but Here's Why You Should Still Wait to Sign Up for Benefits
Social Security's Trustees just delivered some bad news about the state of the program's finances. Benefit cuts may be closer than previously anticipated. Despite an unfavorable outlook, you still shouldn't rush to claim Social Security early. The $23,760 Social Security bonus most retirees completely overlook › Social Security isn't exactly known as a program whose finances are stable. There's been talk of Social Security needing to cut benefits for years. But the program's most recent Trustees Report just delivered some bad news. Social Security's combined trust funds are expected to run dry by 2034. And the OASI (Old-Age and Survivors Insurance) is expected to be depleted by 2033. This means that Social Security cuts could easily be less than a decade away. In light of that, you may be inclined to claim Social Security as early as you can. But here's why you may want to rethink that plan. You're entitled to your Social Security benefits without a reduction if you hold off until full retirement age to file for them. Full retirement age is 67 for anyone born in 1960 or later. However, you're allowed to sign up for Social Security at any point once you turn 62. And you may now be thinking of filing for Social Security at 62 to get your money before benefit cuts arrive. One thing you should know, though, is that benefit cuts aren't guaranteed to happen. Lawmakers have different options they can work with to avoid that unwanted scenario. These include raising full retirement age, increasing the Social Security tax rate, and increasing the amount of wages that are subject to Social Security taxes each year. If you're on the cusp of turning 62, it pays to at least sit tight a bit and see what ideas lawmakers come up with rather than rush to file for benefits right away. Even though lawmakers have been slow to react to the issue of Social Security's impending financial shortfall, this year's Trustees Report might give them the push they need to start prioritizing a solution that stops benefit cuts from happening. You may be inclined to claim Social Security as soon as possible to get ahead of benefit cuts. But if they do happen, and you claim Social Security early, you'll only reduce your benefits even more. Say lawmakers can't prevent Social Security from cutting benefits, and those monthly payments end up decreasing by 20% universally. That's going to deal a blow to your retirement income. But if you claim Social Security at age 62 with a full retirement age of 67, you'll be slashing your benefits by 30% by virtue of that move alone. And then, if broad program cuts happen, you'll be looking at even less money in total. The larger a monthly check you start out with, the less benefit cuts are likely to hurt you. So it could pay to wait until full retirement age to file, or even beyond it. For each year you delay Social Security past that point, up until age 70, your monthly benefits rise 8%. It's pretty clear that Social Security's financial situation isn't rosy. But that doesn't mean claiming benefits early is an optimal solution. But before you commit to doing that, it could pay to see what potential fixes lawmakers come up with. And it definitely pays to run the numbers carefully and understand the financial implications of taking benefits ahead of full retirement age. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. Social Security's Financial Outlook Just Got Worse -- but Here's Why You Should Still Wait to Sign Up for Benefits was originally published by The Motley Fool
Yahoo
01-07-2025
- Business
- Yahoo
Lawmakers Could Raise Social Security's Full Retirement Age. Here's What That Might Mean for You
Lawmakers are considering changes to Social Security to prevent benefit cuts. One option is to raise full retirement age. Not only might that force you to work longer, but it could also affect the amount of money you get each month. The $23,760 Social Security bonus most retirees completely overlook › It's not exactly a secret that Social Security is facing some financial challenges. The program's main revenue source, payroll taxes, is expected to diminish as baby boomers retire in large numbers. Social Security will need to tap its trust funds to keep up with scheduled benefits in light of that. But as per the most recent Social Security Trustees Report, the program's combined trust funds will be depleted by 2034, at which point significant benefit cuts could be on the table. Lawmakers don't want to see those cuts happen, so they've been talking through different solutions to prevent them. And one such solution is to raise Social Security's full retirement age. Currently, that age is 67 for anyone born in 1960 or later. Some lawmakers feel that pushing that age to 69 could help prevent broad Social Security cuts. But a change like that could have a significant impact on your retirement. Here's what it could mean for you. Unless you have a decent amount of savings, you may not be able to retire without claiming Social Security at the same time for income. But if you're someone who can't retire without Social Security, and you don't want to slash your benefits for life, changing full retirement age could create a situation where you have to work two years longer than you want to. But there's more to it than that. You may feel compelled to work an extra two years, but whether you'll actually be able to may be a different story. Not only do older workers sometimes get pushed out of the labor force because of age discrimination, but if your job is physical in nature, you may not be able to do it an extra two years. Worse yet, if you're forced to retire a couple of years early because your body can't handle the physical work, you may be looking at a larger reduction in your monthly Social Security benefits if full retirement age is moved up. For example, right now, claiming Social Security at 65 instead of 67 will reduce your monthly benefits by about 13.33%. If full retirement age is moved to 69 and you sign up for benefits at 65, you could be looking at twice the reduction. People who delay Social Security past full retirement age can accrue delayed retirement credits. Those are worth 8% per year your claim is delayed, and you can rack them up until you turn 70. It's unclear to whether lawmakers will extend the timeframe for accruing delayed retirement credits in conjunction with pushing back full retirement age. But if they don't, and full retirement age is moved to 69, it means your options for boosting your monthly checks will be more limited. You don't need to make any immediate adjustments to your retirement plan to account for changes to Social Security's full retirement age. While the above proposal is on the table, it's one of several being floated to prevent benefit cuts. That said, it's not a bad idea to get more aggressive in funding your nest egg. If this change does become official, and you don't like the idea of working until 69 instead of 67, ramping up on savings could make it possible to retire sooner. In fact, even if no changes are made to Social Security and benefits aren't cut, it's still important to bring savings with you into retirement. In a best-case scenario (meaning no benefit cuts), Social Security will only replace about 40% of your income if you earn an average wage. Most seniors need a lot more money than that to cover their costs without stress. So it's never a bad idea to boost your savings. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. Lawmakers Could Raise Social Security's Full Retirement Age. Here's What That Might Mean for You was originally published by The Motley Fool
Globe and Mail
01-07-2025
- Business
- Globe and Mail
President Trump Has Made Some Big Social Security Changes, but So Far He Hasn't Touched This Key Issue
If you rely heavily on your Social Security benefits, chances are you've been kept up a night or two wondering whether they'd go far enough. So when President Donald Trump came along promising to make major changes to the program, including ending Social Security benefit taxes for seniors and reducing fraud, you probably felt either hopeful or even more uneasy. The president did make several key changes to the program this year, but his main agenda item -- ending benefit taxes -- has yet to come to fruition. And there's an even bigger Social Security issue that President Trump has remained virtually silent on, to everyone's detriment. Social Security is headed for a crisis While President Trump hoped to alleviate short-term pain for seniors by eliminating Social Security benefit taxes, doing so would exacerbate a much bigger issue that's already uncomfortably close to becoming reality. Social Security has been spending more than it's earning since 2021, and it's only thanks to the extra money in its trust funds that it's been able to keep up with scheduled benefits so far. That can't last forever. The latest Social Security Trustees Report estimates the trust funds will be depleted in 2034. That's a year earlier than what last year's report predicted. That doesn't mean Social Security would disappear, though. It would still take in money from Social Security payroll taxes that workers pay as well as Social Security benefit taxes for as long as those remain on the books. But together, that would only be enough to cover about 81% of scheduled benefits in 2035 and beyond. Social Security reform is the only way to avoid major benefit cuts. This has happened before when the program last faced insolvency in the 1980s. And it's likely to happen again in the next few years -- the sooner, the better. What Social Security reform could look like There are three ways to resolve this funding crisis: increase revenue for the program, cut benefits, or do both. Increasing revenue usually means increasing taxes. This could include across-the-board increases or more targeted increases, like raising the ceiling on income subject to the Social Security tax (currently $176,100 in 2025), that would mostly affect the wealthy. We don't know yet what Congress will choose. What we do know is that the longer the government waits to address this issue, the more significant the changes will have to be. The Trustees Report says that if Washington acted immediately to make Social Security fully solvent, it would have to do one of the following: Increase revenue by an amount equal to a permanent payroll tax increase of 3.65%, bringing it to 16.05% as of January 2025 Reduce all current and future benefits immediately and permanently by 22.4% as of January 2025 (or by 26.8% if cuts were only applied to those who applied in 2025 and later) Some combination of the above That's already not a great position to be in, but it gets even worse if we wait. Taking action after the trust funds are depleted would require one of the following steps to keep the program solvent: Increasing revenue by an amount equal to a permanent payroll tax increase of 4.27%, bringing it to 16.67% in 2034 Reduce all scheduled benefits permanently by 25.8% starting in 2034 Some combination of the above What happens next? We don't have any good options, which is part of the reason why President Trump and Congress aren't eager to tackle this issue. No one wants to be the one to make a decision that's guaranteed to hit millions of Americans directly in the pocketbook. But there isn't a way around it. There are ways to mitigate the toll it will take on ordinary Americans, like forcing wealthier Americans to pay more into the program. This could reduce the benefit cut or Social Security payroll tax increase, but it wouldn't be enough to sustain the program on its own. For now, there isn't much we can do other than to make our feelings known to our Congressional representatives, who will ultimately decide what the reforms look like. We're only eight years away from insolvency, so we can't kick the problem down the road much further. Expect to see this issue start to gain more attention in the next few years. And when Washington does make a decision, it'll be time for workers and retirees alike to review their retirement plans and make some changes. The $23,760 Social Security bonus most retirees completely overlook If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.
Yahoo
29-06-2025
- Business
- Yahoo
Seniors on Social Security Just Got Some Really Tough News
Social Security's trust funds will be depleted by 2034. This is a year earlier than expected. It's likely the government will reform the program so significant benefit cuts aren't necessary. The $23,760 Social Security bonus most retirees completely overlook › You probably know by now that retirement isn't all about carefree fun. Living off a fixed income can be tough, especially if you weren't able to save as much as you wanted to when you were younger. So every dollar you have, including your Social Security checks, matters. Unfortunately, the latest Social Security Trustees Report has raised concerns about the program's solvency. This is a serious issue for seniors who rely heavily on their Social Security benefits to carry them through the next few decades. But that doesn't mean you'll soon be covering your expenses all on your own either. Social Security has been spending more money than it's taken in every year since 2021, and that problem continues to worsen. Baby boomers retiring en masse and fewer workers in younger generations to replace them has meant that Social Security tax revenue isn't enough to pay out everyone's benefits. So far, the program has stayed afloat by making up the difference with money in the program's trust funds. But this won't work forever. Eventually, those trust funds will run out, and Social Security could face a shortfall when it does. When Social Security will run out of money has always been a bit of a moving target. Last year, the Trustees Report predicted depletion in 2035. But this year's report now estimates that the trust funds will be depleted a year earlier. This may be due to the passage of the Social Security Fairness Act earlier this year, which increased benefits for certain retirees, and which was projected to accelerate trust fund depletion by six months. This wouldn't be the end of Social Security, though. It would continue to receive revenue from workers paying Social Security payroll taxes and seniors who owe income taxes on a portion of their benefits. Together, this would be enough to cover the majority of Social Security benefits payable today. The 2024 Trustees Report estimated that after trust fund depletion, the program could pay out about 83% of scheduled benefits. The 2025 report puts this a little lower -- around 81%. In either case, you'd definitely continue to get something from the program in 2035 and beyond. That said, a nearly 20% benefit cut is a serious concern, particularly for those who have little to no personal savings. But it probably won't happen. Though the deadline has moved up a little, the government has been aware of Social Security's looming insolvency for years, and this isn't the first time this has happened either. Last time, Congress made changes, like adding Social Security benefit taxes, to bring in more money so it wouldn't have to slash benefits. It's likely this happens again, though we don't know when Washington will make the changes or what they'll look like. Benefit cuts remain a possibility, but it's unlikely they would be 20%. And they may not happen at all. The government might decide to increase the Social Security payroll tax rate that workers pay or increase the ceiling on income subject to Social Security tax (currently $176,100 in 2025). This would force wealthier Americans to pay more into the program. For now, all we can do is wait to see what happens. But once there's a plan in place, it'll be time to revisit your budget and figure out how you'll cover your expenses moving forward. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. Seniors on Social Security Just Got Some Really Tough News was originally published by The Motley Fool
Forbes
23-06-2025
- Business
- Forbes
What Retirees Need To Know About Social Security's Funding Deficit
Congress needs to act soon to prevent future benefit cuts to Social Security The 2025 Social Security Trustees Report estimates that Social Security retirement benefits might be cut by 23% in the year 2033. That estimate assumes Congress doesn't act to close Social Security's funding deficit, which in today's polarized political climate is appearing more likely. With 2033 just eight years away, you'll most likely still be alive then if you're reading this post. So, let's look at what pre-retirees and retirees need to know about this troubling situation and what they can do about it. What Is Social Security's Funded Status? The 2025 Social Security Trustees Report projects that the Old Age and Survivor Insurance (OASI) Trust Fund can pay 100% of retiree and survivor benefits until the year 2033. At that time, the Social Security Trust Fund is projected to be depleted under the trustees' best estimates. Unless Congress acts to close this funding deficit, revenues from FICA taxes paid by workers will be the only source available to pay retirees' and survivors' benefits. These revenues can only support 77% of the benefits needed for retirees and survivors, according to the best estimates in the report. This would result in projected benefit reductions of 23%. The Trustees Report also shows the results of the OASI and Disability Income (DI) funds combined, even though the law would need to be changed in order to combine these funds. If this were to happen, the combined funds would be depleted in 2034, and revenues from FICA taxes could pay just 81% of benefits for retirees, survivors, and disabled beneficiaries. This would result in a projected 19% benefit reduction. Would Social Security Become Bankrupt? It's important to know that Social Security would not be completely bankrupt if the OASI and DI Trust Funds were depleted, as some people might think. Workers would still be paying their FICA taxes, which would fund the benefits of retirees, survivors, and disabled beneficiaries. As a result, benefits wouldn't disappear entirely even if the trust funds were depleted. What Can Congress Do To Close The Funding Deficit? Benefits for retirees, survivors, and disabled beneficiaries are financed almost exclusively by FICA taxes, income tax on Social Security benefits, and interest on trust fund reserves. As a result, there are basically three ways for Congress to close Social Security's funding deficit: Social Security's deficit is about 3.8% of the total covered pay of workers, or about 1.3% of our country's GDP. As a result, Congress would need to increase taxes and/or reduce benefits with a combined value of these amounts. You'd think adjusting benefits and taxes by these small percentages would be achievable. At the moment, however, Democrats and Republicans are dug into their positions and haven't been able to find an agreeable-by-both-sides compromise. Predictably, Democrats want to close the funding deficit mostly with tax increases, while Republicans want mostly to cut benefits. What Do Pre-Retirees And Retirees Need To Do? If you're pessimistic that Democrats and Republicans will make the necessary compromises in the next eight years to close Social Security's funding deficit, then you'll want to start making plans for a reduction in your Social Security income. Fortunately, you have eight years to explore your options. For example, you could start looking for ways to reduce your living expenses, such as by downsizing or spending less money on cars. You could also consider working part time in the next few years and saving the money for that possible rainy day in 2033. If you're eligible for Social Security retirement benefits but haven't yet started them, you might be tempted to start them as soon as possible before they're reduced. Not so fast—delaying benefits might still be your best strategy for maximizing your expected lifetime Social Security benefits. You can analyze your best strategy should there be a benefits reduction with Open Social Security, a helpful, free, online Social Security optimizer program. The Report's Compelling Call To Action The summary of the Trustees Report contains a compelling call to action. 'The 2025 Trustees Reports indicate a need for substantial changes to address Social Security's and Medicare's financial challenges. The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust their expectations and behavior. Implementing changes sooner rather than later would allow more generations to share in the needed revenue increases or reductions in scheduled benefits. With informed discussion, creative thinking, and timely legislative action, Social Security and Medicare can continue to protect future generations.' Well said! Pressure Your Congress Representatives We need to put pressure on Congress now to make the necessary compromises to fix Social Security's funding gap. As a result, my wife and I are writing and calling our Senators and House representative. You can also consider supporting organizations that advocate on the behalf of retirees, such as AARP, the Alliance for Retired Americans, and the National Committee to Preserve Social Security and Medicare. Congress, working Americans, and retirees should take the 2025 Social Security Trustees Report as a flashing red light for a call to action.
