Particularly among millennials, there are widespread misconceptions about the current state of Social Security.
You may have heard that Social Security is in dire financial straits or that it is paying benefits using general tax funds. Or, some people would claim that SS benefits is nothing more than a collection of IOUs since Congress stole its money.
Understanding Social Security Trust Funds
SS Benefits trust funds held $2.83 trillion at the end of 2022. This money is invested to produce returns, just like any sensible financial planner would.
The trust funds for it invested in Treasury securities brought $66 billion in interest income for the program in only 2022.
What happens if Social Security runs out of money in 2034? Checks won’t just stop, which is fantastic news. Payroll taxes on SS will continue to be collected, and certain high-income pensioners are required to pay taxes on their Social Security payments.
These two revenue streams contributed almost $1.16 trillion to Social Security in 2022.
Therefore, if its reserves are exhausted, the benefits would be reduced rather than eliminated.
It is predicted that it will still be able to pay out 80% of the benefits that are anticipated, even without reserves.
Read more: IRS urges taxpayers to act fast: Claim your share of $1.5 billion in unclaimed Tax refunds
Why Delaying Payments Until Full Retirement Age
The majority of government employees and retirees are advised to delay obtaining Social Security retirement benefits until they reach full retirement age (FRA), which ranges from age 65 to 67.
People who are fully insured for SS Benefits (have accrued at least 40 Social Security credits during their working years and are therefore eligible for retirement benefits) can choose to begin receiving their Social Security retirement benefits as soon as they turn 62.
However, they are advised to delay drawing payments until after they reach their FRA unless:
They either have an immediate need for money or are in poor health and don’t expect to live past the age of 78.
Read more: Social Security at 70: Theoretical benefits vs practical challenges