Social Security is a crucial source of income for millions of seniors in retirement. However, the program’s financial state has been a hotly debated topic in Washington for some time now, and there may be big changes ahead. In this blog post, we will discuss three potential Social Security changes that could impact your benefits.
Future Benefit Cuts in social Security
Social Security has been running at a deficit for years, and to cover the shortfall, it has been dipping into its trust funds. However, these funds are projected to run dry by 2034, at which point there will only be enough income to cover around 77% of future benefits. If Congress cannot find a solution before then, benefits could be cut by up to 23%.
Higher Retirement Age
As we approach 2034, Congress has been under increased pressure to solve Social Security’s cash shortfall. Raising the retirement age is one of the potential solutions on the table. Currently, the full retirement age (FRA) is between ages 66 and 67, but some lawmakers have proposed raising it to 68 or older. This would mean seniors must wait longer to collect their full benefit amounts, and those who begin claiming before their FRA would receive reduced monthly payments.
Reduced Benefits for High Earners
Another potential solution to Social Security’s cash shortage is to reduce benefits for the top 20% of earners. While there is no firm information on how much benefits would be reduced or what the income cutoffs might be, higher earners may see benefit cuts in the future.
What Will Happen with Social Security?
Social Security’s future remains uncertain, but Congress will likely find some sort of solution to avoid benefit cuts. Multiple big changes may be implemented, including raising taxes for those earning more than $400,000 per year. To prepare for potential cuts, taking steps now to build up retirement savings and reduce dependence on Social Security may make future changes easier to endure.
In addition to these potential changes, the Social Security Administration has proposed a new rule that could mean bigger monthly payments for Supplemental Security Income (SSI) recipients. Currently, SSI payments are reduced by one-third if a person or couple is living in another person’s home and receiving food and shelter support from that person. However, the proposed rule would remove food from the calculation of in-kind support and maintenance (ISM), which is unearned income in the form of food and/or shelter. This change aims to promote equity and simplify the agency’s policy.
In conclusion, the future of Social Security is uncertain, and potential benefit cuts may be on the horizon. Staying up-to-date on the latest developments and taking steps now to prepare for potential changes may help ease the impact of any future cuts.