Weekend Reading: What Really Happens if Social Security "Disappears"?
This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
Tales of the impending demise of Social Security benefits continually circulate the financial world; However, you shouldn’t let these scare tactics get the best of you.
The dreaded decrease: While yes, there is talk about benefits being cut by 25 percent in 2034, no one truly knows exactly what will happen. What we do know is that we’re talking about the most successful government program in American history, and amongst all the doom and gloom stories we might hear of its stability, it’s important to realize that presently, this is all chatter.
At the same time, seeking varying perspectives from others can be helpful, and this article highlights five takes on the potential “downfall” of Social Security:
📌Chicken Little’s, “The sky is falling!” – Despite many drawing up mass hysteria with claims that Social Security is going bankrupt, it’s not. Money is continuing to flow through the Social Security trust, and any surplus is kept in the Reserve Account, which is being tapped this year to aid in benefit payments.
📌COVID-19 pushed Social Security toward failure – We expect the economy to go through highs and lows, and COVID is another blip on the map.
📌Fixing the Reserve Account issue – We’ve known for some time that the Reserve Account is estimated to run dry by 2034, but there are many avenues Congress can take to handle this debacle.
📌How would we handle a 25 percent cut? If in the unlikely case Congress does nothing before 2034, a decrease in Social Security benefits would affect every individual differently, based on varying factors.
📌What if Social Security drops to $0? – This is the ultimate doom and gloom situation (again, unlikely to happen), where ultimately, many individuals would face a retirement failure.
Take it with a grain of salt: It’s unrealistic to believe that Social Security will fail during the Boomers’ lifetime, but that doesn’t mean you shouldn’t do a little stress testing from time to time, just as you might stash some dry goods in the pantry for the apocalypse. There are much more realistic risks to your nest egg, such as increased taxes, of which you may have more control over.