Worrying about Social Security? You’re not alone

  • By Erin Eddins Financial Well-Being
  • Friday, February 27, 2015 5:29pm
  • Business

If you’re concerned about the sustainability of Social Security, you’re not alone.

Those who are far from retirement may wonder if Social Security benefits will be there for them at all.

And, many people who are close to retirement or already retired are concerned about their benefits being cut when they need them most. But the reality may be less drastic than either of these scenarios.

First, a little background. Social Security is made up of two main elements: the Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund.

The first fund provides benefits to retired workers and their families, as well as to survivors of deceased workers. The Disability Insurance is for workers with certain long-term medical conditions or disabilities and their families.

With that in mind, let’s dive into some frequently asked questions about Social Security and what’s at stake for the program in the future:

How healthy are the trust funds and how long will they last?

According to the 2014 Social Security Trustees Report, the Old-Age an Survivors Trust Fund is expected to have enough reserves to pay full benefits until 2034 and it is estimated that the Disability Insurance Trust Fund should be able to pay in full until 2016.

Currently, the combined trust fund reserves are increasing and should continue to do so for another five years. That will change in 2020, when annual costs will exceed total income and the U.S. Treasury will need to dip into trust fund asset reserves. Without action from Congress, the combined trust fund reserves will likely be depleted by 2033.

What happens after the funds are depleted?

Once the combined trust fund reserves are depleted, the revenue collected from payroll taxes is expected to cover about 77 percent of scheduled benefits. That means that if there are no changes to the program in the next 20 years, the benefits could be about 23 percent less than expected.

What kind of reform or legislative action might take place in the future?

Here are a few of the long-term reform proposals on the table that look to either increase tax revenue or change eligibility/benefit amounts:

  • Raise the full retirement age. Currently, full retirement age for those born in 1960 or later is 67. One proposed reform is to gradually increase the full retirement age to 68 or 70.
  • Reduce benefits for higher earners. Another option is to gradually decrease benefits for the highest-earning 25 or 50 percent.
  • Raise or eliminate the payroll tax cap. Currently any wages above $117,000 aren’t subject to the tax. Removing this tax cap has also been proposed to increase tax revenue.
  • Raise the current Social Security payroll tax rate. Some reformers prefer raising the payroll tax rate to increase tax revenue. According to this year’s report, an immediate and permanent payroll tax increase of 2.83 percentage points would be necessary to address the revenue shortfall.

How do I find out what I’m entitled to under the current law?

The easiest way to get personal benefit estimates is to use the Social Security website, www.socialsecurity.gov. You can either review your Social Security statement or use the retirement estimator.

In the meantime, your best approach is to save as much as possible now so that your retirement is funded by multiple sources and does not rely solely on Social Security benefits. It’s important to develop a plan before retirement to understand where your retirement income will come from.

Erin Eddins is a certified financial planner professional and chartered financial consultant with an emphasis on investment and retirement planning services.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

Black Press Media operates Sound Publishing, the largest community news organization in Washington State with dailies and community news outlets in Alaska.
Black Press Media concludes transition of ownership

Black Press Media, which operates Sound Publishing, completed its sale Monday (March 25), following the formerly announced corporate restructuring.

Maygen Hetherington, executive director of the Historic Downtown Snohomish Association, laughs during an interview in her office on Thursday, Feb. 15, 2024, in Snohomish, Washington. (Ryan Berry / The Herald)
Maygen Hetherington: tireless advocate for the city of Snohomish

Historic Downtown Snohomish Association receives the Opportunity Lives Here award from Economic Alliance.

FILE - Washington Secretary of State Steve Hobbs poses in front of photos of the 15 people who previously held the office on Nov. 22, 2021, after he was sworn in at the Capitol in Olympia, Wash. Hobbs faces several challengers as he runs for election to the office he was appointed to last fall. (AP Photo/Ted S. Warren, File)
Secretary of State Steve Hobbs: ‘I wanted to serve my country’

Hobbs, a former Lake Stevens senator, is the recipient of the Henry M. Jackson Award from Economic Alliance Snohomish County.

Mark Duffy poses for a photo in his office at the Mountain Pacific Bank headquarters on Wednesday, Feb. 14, 2024 in Everett, Washington. (Annie Barker / The Herald)
Mark Duffy: Building a hometown bank; giving kids an opportunity

Mountain Pacific Bank’s founder is the recipient of the Fluke Award from Economic Alliance Snohomish County.

Barb Tolbert poses for a photo at Silver Scoop Ice Cream on Thursday, Feb. 29, 2024 in Arlington, Washington. (Annie Barker / The Herald)
Barb Tolbert: Former mayor piloted Arlington out of economic brink

Tolbert won the Elson S. Floyd Award, honoring a leader who has “created lasting opportunities” for the underserved.

Photo provided by 
Economic Alliance
Economic Alliance presented one of the Washington Rising Stem Awards to Katie Larios, a senior at Mountlake Terrace High School.
Mountlake Terrace High School senior wins state STEM award

Katie Larios was honored at an Economic Alliance gathering: “A champion for other young women of color in STEM.”

The Westwood Rainier is one of the seven ships in the Westwood line. The ships serve ports in the Pacific Northwest and Northeast Asia. (Photo provided by Swire Shipping)
Westwood Shipping Lines, an Everett mainstay, has new name

The four green-hulled Westwood vessels will keep their names, but the ships will display the Swire Shipping flag.

A Keyport ship docked at Lake Union in Seattle in June 2018. The ship spends most of the year in Alaska harvesting Golden King crab in the Bering Sea. During the summer it ties up for maintenance and repairs at Lake Union. (Keyport LLC)
In crabbers’ turbulent moment, Edmonds seafood processor ‘saved our season’

When a processing plant in Alaska closed, Edmonds-based business Keyport stepped up to solve a “no-win situation.”

Angela Harris, Executive Director of the Port of Edmonds, stands at the port’s marina on Wednesday, Jan. 24, 2024, in Edmonds, Washington. (Ryan Berry / The Herald)
Leadership, love for the Port of Edmonds got exec the job

Shoring up an aging seawall is the first order of business for Angela Harris, the first woman to lead the Edmonds port.

The Cascade Warbirds fly over Naval Station Everett. (Sue Misao / The Herald file)
Bothell High School senior awarded $2,500 to keep on flying

Cascade Warbirds scholarship helps students 16-21 continue flight training and earn a private pilot’s certificate.

Rachel Gardner, the owner of Musicology Co., a new music boutique record store on Thursday, Jan. 18, 2024 in Edmonds, Washington. Musicology Co. will open in February, selling used and new vinyl, CDs and other music-related merchandise. (Olivia Vanni / The Herald)
New Edmonds record shop intends to be a ‘destination for every musician’

Rachel Gardner opened Musicology Co. this month, filling a record store gap in Edmonds.

MyMyToyStore.com owner Tom Harrison at his brick and mortar storefront on Tuesday, Sept. 6, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
Burst pipe permanently closes downtown Everett toy store

After a pipe flooded the store, MyMyToystore in downtown Everett closed. Owner Tom Harrison is already on to his next venture.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.