Since millennials have been hearing for years that Social Security is bankrupt, they don’t include it in their retirement planning.
Experts claim that many Americans, especially younger workers, are misinformed about what would happen if the trust fund failed a prediction that is, by the way, not guaranteed.
What If Social Security Ended?
On a recent webcast with other actuaries, Chief Actuary Steve Goss and Deputy Chief Actuary Karen Glenn of the Social Security Administration discussed the impact of the projected depletion of the trust fund. “If the trust fund is depleted at that time, there will be an immediate 25 percent reduction in benefits,” said Glenn.
The system is designed to be progressive, so the benefits paid to low-income earners constitute a larger proportion of their income. As a result, Americans with low incomes may be the hardest hit.
Currently, according to Glenn, low-income retirees, defined as those who earned less than $30,000 annually while employed, receive approximately half of their income. Nonetheless, if the trust fund runs out of money in 2033, this proportion will decrease to about 40% of replacement earnings.
In 2033, Glenn predicted that the replacement rate for high earners, or those whose taxable income exceeded $160,000 per year, would decrease from 25% to 20%.
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Public Opinion On Raising The Retirement Age
It appears highly probable that the Social Security trust fund will run out of money in or around 2033, given its current trajectory.
But this does not imply that it will. According to Goss and Glenn, lawmakers could make a number of changes that would strengthen the trust fund and ensure its financial stability for the next 75 years.
Several proposals from Democrats, Republicans, and bipartisan committees address the impending crisis of the trust fund.
For instance, Republicans have proposed raising the retirement age to 70, effectively slashing between two and three years of benefits for today’s workers a proposal that is unpopular with the majority of Americans, with 75 percent of respondents to an AP-NORC poll opposing it.
Read more: Don’t Be A Victim: How To ‘Slam The Scam’ And Protect Your Social Security
