Your Financial Future: Social Security issues on the horizon
If you owned a business that was gaining 10,000 customers a day, you would probably be hiring additional staff and opening new locations.
To retain these clients in the commercial world, you would have to provide excellent service. After all, time is money.
Yet, in the public world, an entity that is growing at this speed is closing locations and cutting staff. This entity is Social Security. Many people are frustrated. There used to be local SS offices where you could stop in and get many questions answered. That trend was already moving backwards before the pandemic struck. You had to have an appointment and it could take weeks to get one.
Recently Andrew Saul, Commissioner of Social Security, gave an updated report. He said that the physical foot print will most likely continue to shrink. The agency wants to provide more services online.
It has been reported 65% of first time claims for disability benefits are denied. It is estimated that there are 1 million people waiting for a disability hearing. Wait times have been estimated at up to 600 days. The system needs to find a way to process legitimate claims quicker. Social Security must also recognize that many seniors are not as computer savvy as younger Americans.
The agency is facing a funding issue.
When Social Security was created, it was always a program where current workers funded the benefits for those recipients receiving checks. While Baby Boomers were working this was not much of an issue. With 10,000 turning 65 everyday, the percentage of workers to retirees is shrinking. This, combined with a longer life expectancy, has actuarially challenged the funding model.
We faced a similar situation in 1985. Just two years before Social Security would have had to make benefit cuts, Ronald Regan and Tip O鈥橬eil reached an agreement. That was when the full retirement age was gradually raised to 67. The contribution rate was increased, and up to 50% of Social Security income became taxable.
With 2035 getting closer, politicians in Washington, D.C., will have to reach some compromise. It is projected that without these changes, beneficiaries may only receive 79% of promised benefits because of the ratio of incoming tax revenue versus promised benefits. The pandemic had a negative impact on this situation because unemployed workers do not pay into the system.
When these discussions do take place, there will be some politicians suggesting that benefits are increased. As any responsible family knows, you do not increase spending when you have a budget short fall. We cannot continue increasing the deficit. Maybe some of the almost $2 trillion dollars spent recently could have shored up a benefit that seniors contributed to their whole working lives.
Social Security considers your 35 largest earning years when calculating your retirement benefit. You and your employer paid these taxes. Hard working Americans deserve to know that their promised benefits will be there.
Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP, who also wrote the book, 鈥淵our Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.鈥� If there is an area that you would like to see discussed in the column, send your suggestions to gary@BoatmanWealthManagement.com.