Concerns over whether Social Security will survive as baby boomers age into retirement has been a growing issue on many Americans’ minds. The most recent government assessment notes that Social Security will not be able to meet the demands of its beneficiaries starting in 2035 without Congressional intervention.
Employers and employees split the Social Security tax equally and each pay into the fund 6.2% of an employee’s income. Self-employed individuals pay the entire 12.4%. Money received from these payroll deductions is placed into a trust fund that is used to pay retiree benefits for those who qualify.
The reason the trust fund balance will be zero in 2035 is due to more people retiring than workers paying into the fund. Also, seniors are living longer and therefore collecting Social Security over a lengthier period of time.
According to government projections, in 2035 they will need to cut retirees’ benefits down to 77% of the expected total due to insufficient income. Congress is considering some methods to intervene in order to prevent this shortage. Some of the proposed solutions include eliminating the $137,700 income cap so that higher earning workers continue to pay more into Social Security, increasing the tax percentage and/or increasing the retirement age.
At Stouffer Legal, we know that retirement planning includes keeping up with changing laws that could impact your goals. We stay on top of issues related to estate planning, tax planning and elder law. For more information, visit our website resources or schedule a time to speak with one of our knowledgeable estate planning attorneys.