Sep 9, 2021 3 min read

Social Security is one of the most important retirement assets for many people.

It is an income source guaranteed to last a lifetime which can provide income to both spouses even if one had no earned income outside of the household. It also includes cost-of-living increases to help keep up with inflation. This week we will be discussing some upcoming change that are in the news.

Every October, the Social Security Administration announces what the cost-of-living increase will be for the next year. Because of increased inflation the country has been experiencing, it is expected to be around 6%.

This would be the highest increase in 40 years. Cost of living increase don’t let you buy more, they just let you buy the same amount. This is very important in maintaining your lifestyle. This also shows why it is important to use strategies to maximize your SS check. Six percent of $1,200 per month is $72, while 6% of $1,000 is $60. This difference can really add up during your lifetime.

Some concerning news has come out about Social Security. The trust fund is now projected to run out of money one year sooner than was projected last year. At current rates the fund will be deleted in 2034. That is only 13 years from now. If change are not made, beneficiaries are expected to receive about 78% of their expected income.

When SS was started, it was not funded with billions of dollars. It was always a program where current workers paid in to support the benefits of retired individuals. This worked great when all of the baby boomers were working. However, every day now another 10,000 boomers retire and start taking benefits. This demographic shift, along with longer life expectancy, have helped create this problem.

We faced a similar situation in 1985. It was resolved when Ronald Regan and Tip O’Neal worked out a plan in 1983. One the changes made was to move the age to receive full benefits from age 65 to between 66 to 67. Also, up to 50% of SS benefits could be taxable depending on your other income.

Lawmakers will come up with some solution; no one in either party can get re-elected if we get 78% of our money due. They need to stop playing political football and resolve the issue. What they have to do is provide benefits we paid in for and earned. Providing extra benefits probably does not make fiscal sense.

The pandemic also had several effects on SS.

Unemployed people do not pay into the system so this reduces some income. Some people retired earlier than originally planned when the pandemic started either because they lost jobs or wanted to reduce their exposure to other people.

The pandemic also hit seniors especially hard: SS reported nearly 400,000 more beneficiary deaths in 2020 than 2019.

This is a sobering statistic. While we can see the end of the tunnel, the pandemic is not over yet. Take any precautions you think are necessary to protect your family. We can beat COVID-19 working together.

Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP, who also wrote the book, “Your Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.” If there is an area that you would like to see discussed in the column, send your suggestions to gary@BoatmanWealthManagement.com.