A recent assessment suggests that the Social Security checks that millions of retirees receive could be slashed by up to 25% from 2033 if no one in Congress intervenes. The SSA has informed the Senate that the Federal Old Age and Survivors Insurance (OASI) Trust Fund, which pays for Social Security, may be empty soon.
Projected Cuts
The OASI Trust Fund that pays for the Social Security checks is projected to be depleted by early 2033. If there are no changes, then people who are planning to retire may receive up to 21% less for their Social Security benefits. For couples, this could translate to a cut of about $16,500 a year.
A single retiree could be losiing as much as $12,400 annually. Other authorities suggested that low income retirees would suffer further reductions with benefit cap at $10,000 per year.
Reasons for the Shortfall
The Social Security program is spending more than it takes in from payroll taxes. This has led the fund to go for a depletion. As the fund diminishes the program can only give out as much as it has collected.
Proposed Solutions
A number of recommendations have been made to solve this problem. Others are raising the Social Security tax rate from 6.2% to 7.75%, which would suffice for benefits up to 2034. Other proposals include raising taxes and cutting welfare or increasing the age at which people are eligible for receiving welfare.
Political Challenges
While leaders like former President Trump and the current Vice President Kamala Harris assured to defend Social Security, no elaborate plans have been made. This has left retirees in a quandary as to what they will receive in the future.
Impact on Retirees
The possible reductions would be disastrous to the elderly particularly those on fixed incomes. People who are within a couple of years to their retirement should check on their finances and seek advice from financial planners on how to best prepare for the change.
Cost of Living Adjustments (COLAs)
COLA is a concept which determines the increment in Social Security benefits on an annual basis. Nevertheless, the present way of determining COLA is said to have failed in capturing the costs that affect the elderly and consequently results in a reduction of the purchasing power of seniors.
As the future of Social Security benefits may be at risk, it is important that current and future retirees remain informed and prepared. Seek advice from a financial advisor and this way you will be in a position to counter any effects on your finances.
