4 Reasons You Shouldn’t Worry About Social Security

July 19, 2017

It’s that time of year again, when the Social Security trustees release their annual report, leading to a slew of bad news headlines: “Social Security’s grim prognosis,” “Social Security trust fund projected to tap out in 17 years,” etc. But what do these headlines really mean and should you worry about whether you’ll actually receive any of that 7.45% of your pay that you send to the fund in the future? I’m a perpetual optimist, so I tend to look for the story behind the clickbait and what I see is that this is definitely not something to get too worked up about at this point.

Here are 4 reasons why:

1. We’ve been hearing about this since at least 1999. Little-known fact: I was Miss Kalamazoo County 1999, and during my interview for the Miss Michigan pageant, the judges asked me how I felt about the fiscal woes of Social Security. I remember because I gave a bit of a flippant answer — I said, “I know it won’t be there when I retire, so I just look at it as another tax to pay.” Whether or not that is the reason I didn’t make it into the Top 10 will never be known, but now that I know more about the issue, I realize I was wrong. I fully expect to receive some type of benefit from Social Security, I just don’t know yet if the logistics will be the same as they are today.
2. The fund won’t be bankrupt, it just won’t be able to pay what it’s paying today. The current estimate is that as of 2034, the fund will only be afford to pay about 70% of what it owes to people at that time (although a Social Security spokesperson actually told me it was closer to 77% in a meeting last year). But that also assumes that the rules around claiming benefits will remain the same, which is what politicians mean when they talk about “reforming” Social Security. They aren’t saying they’re going to stop paying it to people who are receiving it, they mean they want to change some of the rules so that the fund can continue to pay 100% of what it owes to people well beyond 2034.
3. This is better news than it was a couple years ago. When I first started at Financial Finesse, all of our workbooks and online guidance pointed out that the SS trust fund is projected to run out in 2033. Notice that the projection is now 2034. Like many long-term estimates, the prognosis changes over time as reforms are made and the world changes. It’s similar to the fact that if you run a retirement projection when you’re 40 and it shows you falling short, but then you increase your savings — over time, you’ll get on track. If there’s anything we’ve learned over the past several years of last-minute action to keep the lights on in Washington, our Congressional leaders are terrible procrastinators. Perhaps I’m being overly optimistic, but I have a hunch that by the time 2034 rolls around, people currently collecting SS won’t be planning for a 30% pay cut.
4. I probably won’t receive what’s currently projected as my benefit. It’s safe to say that by the time I reach my 60’s, the rules around claiming Social Security will be different. Here are some of my own personal predictions, which are 100% my opinions based on nothing more than my own knowledge (aka I’m just putting ideas out there).
   • Right now the earliest age to start collecting is 62 — if I had to guess, I’d say that age will be bumped up.
   • Today you can claim your benefit regardless of other income or savings, although your benefit may be taxed — I suspect that eventually there will be means testing, where people of a certain income or wealth level will not even be able to claim a benefit.
   • Depending on when you were born, full retirement age ranges from 65 to 67 — I won’t be surprised if that age is closer to 70 and that late retirement age isn’t pushed back to 72 or later at some point.

What does this mean for you?

At this point, we have to go with what we know when projecting our own future retirement projections. If the Social Security trustees are saying that in 2034 that benefits will have to be cut to 70% in order to keep things going, then that’s the best we have to go on for now. Some people elect to not even factor SS in to their retirement projections, preferring instead to rely on their own savings, which they have more control over. I personally just take my projected benefit and multiply it by .7 to get the amount I use in my projections. Until we hear something different or major reforms are passed, that’s truly our best guess.

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