Social Security may bounce back for a few years if the economy recovers fast enough, but the Social Security Administration admits as of 2016 Social Security will run at a deficit permanently until funds are exhausted in 2037.
Social Security was never meant to be a person’s sole source of retirement income but rather a supplement to retirement savings, and the program today has far exceeded its original intent. The strain that has been put on this system by the economy and the national debt makes its future unpredictable and unfortunately nobody knows for certain what will happen to Social Security retirement benefits going forward.
Retirement savers and persons currently utilizing their Social Security benefits need to protect themselves and their retirement future by creating a “plan B” to compensate for a potential drop in benefits.
If you’re in retirement or about to retire, there will most likely be little impact on your benefits, but remember you shouldn’t rely on Social Security as your only source of retirement income. There may not be much time for you to generate new wealth, but you can take some steps to protect the wealth you do have by reducing risks, creating an income plan and planning for the unexpected.
For example, by creating an income plan, you can better determine how much income you will need in retirement, identify all potential sources of income and see where you come up short or have a surplus. From there, you can plan the order of asset or account liquidation that makes the most sense for your retirement plans.
If you’re more than five years away but less than 27 years away from retirement, your Social Security benefits may be impacted, but you do have time to maximize your savings strategy. You can take advantage of options such as making catch-up contributions to your retirement savings plan if you’re 50 years old or older; utilizing savings vehicles that provide compounding interest, allowing your principal to grow faster; or laddering investments.
If you’re more than 27 years away from retirement, you could very well be on your own for retirement, and if not you will most likely be paying higher taxes to supplement government programs. Getting a head start on saving now by utilizing vehicles such as employer-sponsored retirement savings plans and individual retirement accounts will pay off in the long run.
Christopher K. Abts is a financial planner in Reno. He can be reached at email@example.com.