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Rumors of Social Security going bankrupt often swarm the financial world. However, in reality, benefits are set to decrease to 78 percent (in 2034 to be exact), and lawmakers will more than likely step in and make a move far before then.
There are varied avenues congress could take (likely involving increased taxes), and this article highlights a few potential adjustments, as well as how they might affect your benefits. They include:
📌Increased taxes on benefits – Currently, up to 50 percent of a beneficiary’s check can be taxable if their income is between $25,000 to $34,000 for individual filers, or $32,000 to $44,000 for those filing jointly. Up to 85 percent of benefits can be taxed if a beneficiary’s income goes beyond these thresholds. Past podcast guest, Larry Kotlikoff, advises lawmakers could changes these ranges to bring more money into the system.
📌Increased payroll taxes – Working individuals currently pay 6.2 percent of their paycheck into Social Security, and their employer matches. While these payroll taxes apply to wages up to $142,800 now, that limit could be raised, or the contribution rate could be increased.
📌The full retirement age could be raised – In 1983, congress increased the full retirement age from 65 to 67, and they could consider doing it again.
Safeguard your savings: Your benefits aren’t going away. However, this doesn’t mean you shouldn’t stress-test this piece of your retirement plan, just as you would with rising taxes and market volatility.