SPRINGFIELD, Mo. Millions of Americans will not receive full, promised social security benefits when they retire.
The combined trust funds for the government’s two largest entitlement programs will be gone by 2035.
Basically, there will not be enough money to pay everyone the full benefits.
And if Congress doesn’t make a change by 2035, there will only be enough money to pay about 75% of the benefits.
“You know, by the time I’m 53, they’re going to stop handing out benefits for that stuff, that’s not very fair since we’ve paid it all our lives, you know,” said Jeremiah Mahan, who is not happy about the potential for reduced social security benefits, “say you work at a factory for 45 years, and you pay in this whole time, well, come retirement age, maybe you didn’t make very much at that factory, and now the only safety net that you have is gone.”
Social security benefits are funded by social security taxes and paid by people who are still working.
“Today’s tax dollars are what’s used to pay for today’s benefits,” said Dr. David Mitchell, a professor of economics at Missouri State University.
Dr. Mitchell said that system only works when there are more people paying taxes than receiving benefits, “the issue is that as time goes by, the percentage of the population that’s collecting benefits is growing faster than the percentage of the population that’s actually paying taxes. So you’ll get to the point where the amount of taxes that are received isn’t going to be enough to pay for the number of benefits that have been promised.”
“So that money directly goes more or less from your pocket, my paycheck, to the pockets of those who are receiving benefits, retired, disabled, and such,” explained Dr. James Philpot, associate professor of finance at Missouri State University, “now, which by the way would be illegal if a private firm did this. But it’s the government so they can do what they want.”
And solving the problem won’t be easy.
“You either have to tell people in 2035, 2040, 2045, etc, that they’re going to receive fewer benefits, or you have to increase the taxes of the people that are working during that time,” said Dr. Mitchell, “those are the only two solutions.”
So Dr. Philpot said the best thing to do is to focus on saving elsewhere.
“I’m not depending on social security to be there or anything like that,” Mahan said.
“If I am looking at retirement planning now, what I would want to do especially if I’m under age 40 is basically discount social security as part of my retirement income,” Dr. Philpot said, “and so I would want to beef up my other savings, IRA, 401K, employer plans.”
To check the status of your social security benefits, click here.