Client Login 401(K) Login Contact Us Search

The news tends to over-dramatize the subject matter on which it is reporting. All too often this results in strong opinions or flat-out false statements. When it comes to Social Security benefits, the most common opinion I hear is that Social Security is going broke. It’s the elephant in the room as nervous clients jokingly comment that these benefits cannot be counted on any longer.

Social Security benefits are not going bankrupt.

It has been and still is in a state of financial difficulty. Theories developed on whether or not various levers can be pushed or pulled to help keep funds available for all retirees, widows and widowers, and the disabled. The strategies to help keep Social Security benefits available for all who are eligible to receive them has been contemplated over the course of several past presidential terms. This is not new, and we are all awaiting the day that a lever is significantly pushed or pulled.

Because Social Security is a program funded by payroll taxes, it will continue to be funded. The concern isn’t so much that it will stop being funded, but instead that the level of funding cannot keep up with the cash outflows. The Trustees of the Social Security trust funds report the financial status of the program each year. According to the 2016 report, the trust funds are projected to be depleted by 2034 (same year projected in the 2015 report). Without any changes, it could be assumed that starting in 2034 there would need to be benefit cuts for the outflows to match the inflows. You can view a summary of the 2016 Trustees report here

Most individuals believe their future benefits will be cut. One common belief is that a law will be put in place to means-test those receiving Social Security benefits to determine if their benefit should be reduced. This could be accomplished by reviewing an individual’s income via the tax return. Some think that their net worth could somehow be gathered to make this determination. Regardless, most clients feel they cannot rely on this benefit for their retirement projections.

Social Security Is Not a Battle to Fight in the Moment

As with past presidents, it appears Social Security is not a battle to fight in the moment. President Trump said that the best way to fix the financial woes of Social Security is to grow the economy. This means that no significant laws will be put in place to curb the long-term solvency issue today. If the economy can grow at a larger clip, then more payroll taxes can be collected.

Don’t be surprised if you continue to hear about the “wait-and-see” approach to fixing the solvency of Social Security benefits. This was the approach of our past presidents (Bush Sr., Clinton, Bush, and Obama). But don’t be surprised too if “the buck stops here” with President Trump. President Trump surrounds himself with several well-known fiscal conservatives who called for Social Security reform in the past (Budget Director Mick Mulvaney and Social Security adviser Tom Leppert).

Keep up to date on changes to Social Security benefits by visiting the Social Security Administration website