Social Security is a vital program that provides financial support to millions of Americans. However, the program faces challenges that could impact future benefits. Experts say that while Social Security will likely still exist for years to come, benefit payouts may be reduced.
According to a report, Social Security is expected to pay 100% of its current benefits through 2035. After that, benefits could be reduced to about 83% of scheduled payouts. This means that if the average monthly benefit is $1,976 in January 2025, it could drop to approximately $1,640 for those retiring after 2035.
Social Security is funded by payroll taxes. Employees pay 6.2%, employers pay 6.2%, and self-employed individuals pay 12.4%. The money collected goes directly to current beneficiaries, not into a personal savings account.
Today’s workers essentially pay for current retirees, and future workers will pay for your benefits. The amount you receive from Social Security depends on factors such as your marital status, career earnings, and retirement age. Most people can start claiming benefits at 62, but delaying can result in a higher monthly payout.
Future Social Security strategies
The official Social Security calculator can help estimate your benefits. While Social Security is a crucial part of many retirees’ income, it likely won’t cover all expenses.
Even a full benefit amount isn’t enough for most people to live on comfortably. Rather than relying solely on Social Security, experts recommend taking action now to grow your own retirement fund. Steps to help save for retirement include:
1. Setting up retirement accounts and contributing when you can
2. Maxing out employer-sponsored plans with matching contributions
3. Opening an IRA and contributing up to the yearly maximum
4. Paying off your mortgage early to eliminate a large expense
5. Relocating to areas with lower taxes and housing costs
6. Investing in a health savings account (HSA) for tax advantages
The worst thing you can do is assume Social Security will cover all your needs.
Start planning today to ensure a secure financial future, despite the uncertainties surrounding the program. By combining Social Security with savings strategies and smart money management, you can build a sustainable retirement plan.
Image Credits: Photo by Jp Valery on Unsplash
