It is common enough for clients and others to express curiosity or concern about the future of the Social Security program, especially as their financial plans may include or depend on its benefits. This week the team offers some perspective on their look ahead at the program. Readers might also want to read a previous blog entry “Productivity Growth and the Diffusion of New Technologies” (July 1, https://pitonwealth.com/investment-resources/productivity-growth-and-the-diffusion-of-new-technologies) about productivity, since productivity growth could serve as an “elixir” for government debt, not directly for Social Security, but energizing a robust economic environment that could allow for more flexibility in working out financial maneuvers to keep the fund healthy.
From the Team’s perspective, reductions in benefits are likely to remain politically unpopular and thus a less likely scenario, especially when there are other options for offsetting looming potential financial issues for the program. These include:
- Changing the initial and/or Full Retirement Age (FRA) of upcoming beneficiaries. There have been changes to the retirement ages before, and adjusting the timing of benefits for future beneficiaries could ease requirements in the near future. As life expectancies have changed, such adjustments arguably keep the program in line with its designed goals of supporting recipients in need and otherwise less likely to be in the workforce.
- Currently only the first $184,500 of income is subject to the Social Security tax, but raising this amount would generate more revenue for the program and perhaps more politically palatable than some other proposals.
- There are proposals for forms of “means testing” benefits, with the idea that individuals with other income streams or forms of financial resources could have their benefits calibrated accordingly.
A combination of these options, potentially along with still other measures, seems probable in the coming years. For those interested in details of proposals and their impacts, the U.S. Government maintains of public list of proposals along with actuarial assessments of each at https://www.ssa.gov/oact/solvency/index.html.
Additionally, Piton Wealth Advisor Aaron McGaughey, CFP®, has an introductory video about how the program fits into financial planning, “Social Security: Options to Help You Maximize Your Benefits,” which you can find at https://pitonwealth.com/investment-resources/videos. Piton clients know that their advisor regularly analyzes their Social Security situation and incorporates that analysis into their recommendations, but clients should consult with their advisor any time that they have questions, concerns or change of status.