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Yahoo
10 hours ago
- Business
- Yahoo
The Future of Social Security Just Went From Bad to Worse. Here's What Seniors Can Expect Next.
The Social Security trustees expect to deplete the trust fund in just a few years without changes. Cuts to the program will be even steeper than expected a year ago. There are several factors driving the increased deficit. The $23,760 Social Security bonus most retirees completely overlook › Social Security is the backbone of many Americans' retirement plans. More than one-third of adults said the government program would be a major source of income in retirement in the most recent edition of an annual Gallup poll. That number has climbed higher over the last 20 years since Gallup started the survey. Meanwhile, six in 10 current retirees say their monthly check is a big piece of their budget. But with more and more Americans relying on Social Security, the future of the program has never looked more uncertain. Not only are seniors staring down the barrel of benefit cuts in just a few years, but the problem is only getting worse. Here's what seniors can expect and how they can plan for the future of Social Security. Retirees could see a significant benefit cut in just eight years if Congress doesn't act to change Social Security and improve its longevity. That's when the Social Security Board of Trustees estimates the program will deplete the Social Security Old Age and Survivors Insurance trust fund. The Social Security trust fund was established to hold excess tax revenue from wages to pay out to retirees when they start collecting benefits later. In the meantime, the Social Security Administration invests those funds in government bonds to earn a steady return on the principal. Over time, the balance grew as the working population grew faster than the retirement population. But as Baby Boomers started retiring, life expectancies increased, and younger generations had fewer children, the demographic shifts started putting pressure on the trust fund balance. As a result, Social Security has been running a deficit in most years since 2018. And that deficit is getting worse each year as the retired population grows faster than the working population. Every year, the trustees analyze the current state of Social Security and forecast the future of the program. Changes in the workforce, life expectancies, or Social Security policies can impact those estimates. Unfortunately for seniors, the projections got even worse this year. While the 2024 Trustees Report expected retirees to face a 21% overall reduction in benefits starting in 2033, that number climbed to 23% in the latest edition. Here's why seniors could be facing bigger benefits cuts and what they can do about it. It's not just the growing retiree population that's negatively impacting the health of Social Security. After all, almost everyone collecting Social Security today paid into the system for years before retiring. One notable shift negatively impacting Social Security is the growing income inequality in America. Only 82% of earnings were subject to Social Security tax in 2022. That compares to the 90% benchmark Congress targeted in its 1983 Social Security reforms. But even if we returned to that benchmark, it would only make up a portion of the shortfall over the coming years. Another challenge is a slow-growing working population. That's exacerbated by a decline in immigration and further hurt by current immigration policies imposed by the Trump administration. That said, allowing more immigrants to work in the United States (and pay Social Security taxes) would provide only a small amount of additional revenue to Social Security. The biggest change over the past year that's led the trustees to increase their forecast of the Social Security shortfall is the passage of the Social Security Fairness Act. The law repealed the Windfall Elimination Provision and Government Pension Offset, boosting Social Security benefits for 3.2 million retirees and many more in the future. It was also retroactive to 2024, further depleting the trust fund. So, while those retirees will see a step up in their benefits, many more could see deeper cuts in the future. That's not lost on most seniors, and it's led a surprising number of 62-year-olds to claim their benefits as soon as possible this year instead of waiting to maximize their benefits at age 70. But that might not be the smartest move. Here's why. While the program faces a major threat if Congress fails to act within the next eight years, it's still in most seniors' best interest to wait to claim Social Security on their own terms. There are two key reasons. First, it's highly unlikely Congress will allow Social Security benefits cuts. It may enact laws raising the full retirement age in the future, increasing the Social Security tax, increasing the amount of taxable wages, or some combination of all that and more. It could allow benefits to come out of the general fund instead of the trust fund (hopefully with a plan to return Social Security to solvency and reduce the overall government debt). But the clock is ticking for Congress to take action. Second, even if there are benefit cuts in the future, taking Social Security early (when you'd otherwise wait) could result in a much worse scenario for you in the future. The breakeven point for lifetime Social Security income will get pushed out further if you wait and Social Security is forced to cut benefits. But at its core, Social Security is longevity insurance. You'll be much better off in your late 80s if you waited to take Social Security and receive a bigger check than if you claimed as soon as possible. So, while the outlook for Social Security is getting worse, seniors shouldn't be in a rush to get their money while they can. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. The Future of Social Security Just Went From Bad to Worse. Here's What Seniors Can Expect Next. was originally published by The Motley Fool
Yahoo
05-06-2025
- Business
- Yahoo
4 Social Security Changes Washington Could Make to Prevent Benefit Cuts
Consistent deficits have set the Social Security Trust Fund on pace to be depleted in 2034, in which case an across-the-board 23% benefit cut would be necessary in 2035. Increasing Social Security's revenue by applying the payroll tax to more income and raising the payroll tax rate would eliminate a significant portion of the funding deficit. Cutting Social Security's costs by raising full retirement age and reducing benefits for high earners would eliminate the remaining portion of the funding deficit. The $23,760 Social Security bonus most retirees completely overlook › Social Security is a important source of income for millions of Americans, but the program has a serious financial problem. Costs have increased faster than revenues in recent years because the aging population is growing more quickly than the working population. As a result, the trust fund, the financial account that pays benefits, is on track to be depleted within a decade. Specifically, the Congressional Budget Office estimates the trust fund will be exhausted in 2034. That would eliminate one source of revenue (i.e., interest earned on trust fund reserves), and the remaining tax revenues would only cover 77% of scheduled payments. That means a 23% benefit cut would be necessary in 2035. Fortunately, the lawmakers in Washington have several years to find a better solution. Here are four Social Security changes that could prevent deep, across-the-board benefit cuts. Social Security is primarily funded by a dedicated payroll tax, which takes 6.2% of wages from workers and employers. But some income is exempt from the payroll tax. Specifically, the maximum taxable earnings limit is $176,100 in 2025. Income above that threshold is not taxed by Social Security. Importantly, the Social Security program is projected to run a $23 trillion deficit over the next 75 years as it's strained by shifting demographics. But the deficit could be slashed by applying the payroll tax to more income. For instance, including income above $400,000 would eliminate 60% of the 75-year funding shortfall, says the University of Maryland. Under current law, the Social Security payroll tax rate is 6.2% for workers and their employers. But gradually raising that figure would eliminate a portion of the long-term deficit. For example, increasing thetax rate by 0.05% annually over a six-year period would eliminate 15% of the 75-year funding shortfall, according to the University of Maryland. Now that I've discussed two possible changes, let's step back and look at the big picture. There are basically three ways to resolve Social Security's financial problems: (1) increase revenue, (2) reduce costs, or (3) some combination of the first two options. The changes discussed so far would increase revenue, but the next two changes would cut benefits. However, they are more subtle cuts than the 23% across-the-board reduction that would follow trust fund depletion. Workers are eligible for retirement benefits at age 62, but they are not entitled to their full benefit -- also called the primary insurance amount (PIA) -- until full retirement age (FRA). Anyone that claims before full retirement age receives a smaller payout, meaning they get less than 100% of their PIA. FRA is currently defined as 67 years old for workers born in 1960 or later, but raising the figure would reduce the long-term deficit. For instance, increasing FRA to 68 years old by 2033, meaning it would apply to workers born in 1965 or later, would eliminate 15% of the 75-year funding shortfall, according to the University of Maryland. Social Security benefits are determined as percentages of two bend points. Specifically, income from the 35 highest-paid years of work is adjusted for inflation and converted to a monthly figure called the average indexed monthly earnings (AIME) amount. The AIME is then run through a formula that uses two bend points to determine the PIA for each worker. Modifying the second (highest) bend point would eliminate a portion of the long-term deficit by reducing benefits for high earners. For instance, the University of Maryland estimates that reducing benefits for individuals with income in the top 20% could reduce the 75-year funding deficit by 11%. Here's the big picture: The four changes I've discussed would eliminate 101% of Social Security's $23 trillion funding shortfall, which would prevent across-the-board benefit cuts in 2035. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. 4 Social Security Changes Washington Could Make to Prevent Benefit Cuts was originally published by The Motley Fool Sign in to access your portfolio
Yahoo
29-05-2025
- Business
- Yahoo
How dependent is Florida on Social Security? Study ranks state, how much people make
Senior citizens in Florida may be facing rougher retirement years than they hoped. President Donald Trump has promised to exempt Social Security from federal income tax, which would provide a short-term gain, but the nonpartisan Congressional Budget Office says that would deplete the Social Security Trust Fund even faster than declining revenues are now. If no other changes were made, that would force major cuts in Social Security benefits within seven years, the CBO said. Many Americans have also seen their 401(k) retirement funds drop in recent months as Trump's on-again, off-again tariffs have caused massive upheavals in the stock markets. However, Social Security checks could increase by 2.4% next year based on the May 13 consumer inflation report, according to estimates by an independent analyst. Just under 74 million people received benefits in April 2025, including Social Security, Supplemental Security Income (SSI) or both, according to data from the Social Security Administration. Of those, 77.1% were aged 65 or older. Getting by: How much to Americans rely on programs like Medicaid and Social Security? According to an analysis by personal finance site GOBankingRates, Florida has the fourth-highest percentage of households with Social Security income, 36.72%, behind West Virginia (41.22%), Maine (37.27%), and Hawaii (37.18%). That means 3,139,979 Florida households, more than a third of the families in the state, receive some form of Social Security benefits. The average Social Security income in Florida, as of April 3, 2025, was $24,048, the analysis found, with the average total income from retirement and Social Security income at $59,497. Florida had more than 5 million people claiming Social Security benefits as of December 2023, according to the SSA. That included more than 3.9 million retirees, over 478,000 disabled workers, more than 401,000 spouses or survivors and nearly 240,000 children. Nearly one in five Florida retirees, family members, veterans and others receive Social Security benefits, according to the AARP. Supplemental Security Income is a benefit payment for those with limited income or resources aged 65 or older, who are visually impaired or have a qualifying disability. Children with a qualifying disability can also get SSI, according to the SSA's website. Adults who earn more than $2,019 from work monthly typically do not qualify for SSI. Social Security payment schedule: Why some Florida recipients will get extra checks in May As of April 2025, 543,098 Floridians received SSI payments according to an SSA report. Of those, 160,173 were 65 years old or older, and 382,925 were visually impaired or disabled. In March, 241,362 seniors received SSI payments. A cost-of-living adjustment (COLA) in Social Security is meant to help people keep their purchasing power from being eroded by inflation. The COLA for 2026 won't be determined until October since it relies on inflation data from the third quarter, which is collected between July and September. However, analysts tracking data leading up to it suggest that Social Security checks could increase by 2.4% next year. If accurate, that's down from this year's bump of 2.5% and the 2024 COLA of 3.2%. Overall consumer prices increased 2.3% from a year earlier, down from a 2.4% rise the previous month, according to the Labor Department's consumer price index, a measure of average changes in goods and services costs. People ages 65 and up are the only group that has seen an annual increase in poverty since 2020, according to the Census Bureau's supplemental poverty measure report. In 2023, 14.2% of seniors were in poverty, up from 14.1% the prior year, 10.7% in 2021 and 9.5% in 2020, the Census Bureau said. It's also the highest percentage since 2016's 14.5%, according to reports from USA TODAY. "The Social Security Administration has been very open and honest that if action isn't taken soon, they may not be able to provide full benefits to retirees down the road," Mike Lynch, retirement planning expert and managing director of Applied Insights at Hartford Funds, said in 2024. "Our elected leaders need to take action." This article originally appeared on The Daytona Beach News-Journal: Florida ranks 4th in US for dependency on Social Security, study says
Yahoo
09-05-2025
- Business
- Yahoo
Social Security increase missing? Here's what to do
(NewsNation) — The Social Security Fairness Act, signed by former President Joe Biden in January, increased benefits for many seniors in the United States. But what if you haven't received your increase? As of May 2, the Social Security Administration reported 84% of workers have received increased benefits. This accounts for about 2.4 million people, and could lead to some seniors getting as much as an extra $1,100 per month. Many seniors who were owed an increase should've already seen it in their benefits check. The government automated many of the changes, but some cases are a bit more complicated and can't be easily automated. Employees with Social Security will need to update each of these complicated cases manually. If you didn't receive your increase in April, you should continue watching out for a notice from the Social Security Administration. These notices should tell you when the benefit will be applied and how much your new benefit will be. Maximize health savings: The tax benefits of HSAs and FSAs You might also qualify for the one-time retroactive payments that date back to January 2024. If you qualify, you could get a lump sum to make up the difference between what your benefit checks were and what they should've been under the new act. These retroactive payments are reportedly scheduled to be sent out to all qualifying individuals by early November. The Social Security Fairness Act won't affect all seniors' benefits. The act focuses on ending the Windfall Elimination Provision and the Government Pension Offset. According to Social Security, these provisions reduced or eliminated benefits for over 2.8 million people. Spending smarter: Best ways to use credit card points The legislation affected those who received a pension based on work that wasn't covered by Social Security because they weren't paying Social Security taxes. Now, it will increase Social Security benefits for certain workers, including some of the following: Teachers, firefighters and police officers in many states Federal employees covered by the Civil Service Retirement System People whose work was covered by a foreign social security system However, not all teachers, firefighters, police officers and public employees qualify for the increase. According to Social Security, around 72% of state and local public employees were not affected by the Windfall Elimination Provision or the Government Pension Offset. Advocates say the Social Security Fairness Act, despite righting a disparity, will put strain on the Social Security Trust Fund. Critics are concerned that funds will run out sooner than projected, with original estimates at 2035. 'The bill I'm signing is about a simple proposition: Americans who have worked hard all their life to earn an honest living should be able to retire with economic security and dignity — that's the entire purpose of the Social Security system,' former President Joe Biden said during a signing ceremony at the White House in January. 'This is a big deal.' Americans more afraid of running out of money than death: Survey The future of Social Security is a top political issue and was a significant point in the 2024 election. If you are ever missing a payment, the agency recommends first contacting your bank or financial institution to see if there is a delay. If there is no delay, you can contact the agency at 1-800-772-1213 or contact your local Social Security office. You can use NewsNation's Social Security calculator to estimate your monthly benefit. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Epoch Times
29-04-2025
- Business
- Epoch Times
Cracking the Code: Understanding Social Security and Maximizing Your Benefits
Social Security is a phrase often used in retirement planning and has been discussed in the media recently. For many, though, it remains a mystery. It provides income, but how does it really work? Further, it's easy to become overwhelmed by countless claims, strategies, and confusing terminology. This post, however, will help you navigate Social Security's complexities, maximize your benefits, and secure a more comfortable retirement. What Exactly Is Social Security? Imagine a safety net made up of generations of hardworking Americans. That's what Social Security is all about. The program was While working, you and your employer contribute 6.2 percent of your wage through the Federal Insurance Contributions Act (FICA). In turn, the Social Security Trust Fund benefits current beneficiaries. In a sense, today's workers are supporting yesterday's retirees. Decoding the Benefit Calculation Social Security checks don't appear out of nowhere. The amount is calculated based on your lifetime earnings. As a simplified breakdown, here is what you need to know. Your earnings history determines Social Security retirement benefits. To calculate your benefit, the Social Security Administration (SSA) uses the following formula: Your highest 35 years of earnings (adjusted for inflation) Your age at the time you begin claiming Your full retirement age For your information, based on the 2024 edition of the Full Retirement Age (FRA) A person's FRA is the age at which they can receive 100 percent of their Social Security benefit. Depending on your birth year, it may be: The FRA for those born between 1943 and 1954 is 66. Those born between 1955 and 1959 will see an increase in FRA. If you were born in 1960 or later, your FRA is 67. You can start claiming at age 62 but must accept a 30 percent reduction. Alternatively, you can delay benefits past your FRA and increase your monthly payment up to 70 years of age. The Million-Dollar Question: When Should You Claim? Here is where 'strategy' comes in. There is no one-size-fits-all solution. In each case, it varies: Claiming early (Age 62–FRA). Pros: You get to access your income sooner. This is a great option if you need the money or want to retire early. Cons: It is possible to have your benefits permanently reduced by up to 30 percent. In addition, your spouse will receive lower survivor benefits as a result. Claiming at FRA. Pros: The benefit you receive is full and unreduced. This is a good middle ground for many people. Cons: If you delay, you lose out on the extra boost. Delaying Until 70. Pros: Your benefit increases by 8 percent every year you delay past FRA up to age 70. Over your lifetime, this can amount to a substantial sum. Cons: It takes longer for your income to arrive. As such, you might not 'break-even' if you don't live a long life. Making Sense of the Break-Even Point In Social Security discussions, the term 'break-even' is often used. It means the benefits you receive from delaying exceed those you would have received from claiming earlier. If you expect to live well into your 80s or beyond, delaying benefits can be beneficial financially. Strategies to Maximize Your Benefits Time isn't everything; it's all about playing the long game. Work at Least 35 Years With fewer than 35 years of income under your belt, zero-income years are included in your benefit calculation, reducing it. Replacing low-earning years from your early career with part-time work later in life may even be possible. Boost Your Earnings You'll receive more benefits if you earn more (especially during years of higher wages). An individual's lifetime earnings are affected by income from raises, promotions, side gigs, and self-employment. Strategic Delaying In addition to delaying your benefits beyond your FRA, you may also be able to increase your monthly check considerably. This is particularly useful for those with longer life expectancies and families that have a long lifespan. Spousal Coordination To boost household income, married couples can use several strategies: Spousal benefit . At FRA, a spouse can receive up to 50 percent of the other's benefits, even if they didn't work much. Claim and suspend . While one spouse receives a spousal benefit, the other claims their own benefit at FRA. Survivor benefits . After turning 60, widows and widowers can switch from survivor benefits to their own higher benefits. Increase Your Tax Awareness Up to 85 percent of your Social Security benefits may be taxable, depending on your other sources of income (pension, withdrawals from retirement accounts, etc.). You can minimize your tax burden if your income does not exceed certain thresholds. As of 2025, the basic thresholds are as follows: Single filers . An income over $25,000 may be subject to partial taxation. Joint filers . If your income exceeds $32,000, your benefits will be taxed. Conduct an Earnings Test If you claim benefits before FRA and continue to work, the Social Security Administration may temporarily withhold part of your benefit. As an example, if you are under the FRA in 2025, you lose $1 for every $2 you earn over $22,320. Although the money isn't lost, it can affect short-term cash flow because it will be added back to your benefits later. Use Online Tools The SSA's website ( has calculators and access to your Social Security Statement. By regularly checking your statement, you can ensure that your earnings record and benefits are also accurate. Be Aware of Special Situations Divorced individuals. It may be possible to claim benefits based on your ex-spouse's record if you were married for more than ten years. Survivors. Benefits may be available to survivors' spouses and minor children. Public employees. The Windfall Elimination Provision (WEP) or Government Pension Offset (GPO) can reduce the benefits of some government workers. Debunking Common Social Security Myths Let's debunk some of the most common myths to help you better understand this vital part of your financial future. 'The Social Security System Is in Financial Trouble' This is a big one, and it causes unnecessary worry. It is not likely that Social Security will disappear overnight. It is a pay-as-you-go system: you and your employer contribute to FICA taxes, but that money primarily pays current benefits. Social Security indeed faces some financial challenges. Historically, the system has collected more than it has paid out, accumulating a nice surplus. The tide is turning, however. With more people retiring and living longer, more benefits are being paid out than taxes are being collected. Related Stories 4/26/2025 4/25/2025 The key takeaway is this: without changes, the surplus will disappear Another way to think of it is like your car running low on gas. While it won't stop working immediately, you'll have to refuel soon. This is where Congress comes in. As they did in 1983, they will need to make adjustments. Among those adjustments could be raising the retirement age, raising taxes, or taxing benefits differently. 'Social Security Benefits Must Be Claimed by Age 62' Many people make potentially costly decisions because of this myth. Yes, 62 is the earliest you can claim benefits. However, it is not required. You will receive your full, unreduced pension when you reach your 'full retirement age' (FRA). Your FRA depends on your birth year; if you were born after 1960, your FRA is 67. At 62, you can claim early and get a permanent reduction in your monthly payments. For example, claiming benefits at 62 could mean a 30 percent reduction in monthly income if your FRA is 67. Even if you plan to live a long retirement life, that's a significant sum. On the flip side, if you can hold off until age 70, you'll get a 'bonus' of about 8 percent more per year for each year you delay claiming your FRA. In other words, if your FRA is 67 and you wait until 70, your monthly income will increase by 24 percent. If you wait from 62 to 70, your income will increase by 77 percent. 'Retirement Income Will Be Derived Mainly From Social Security' Although Social Security is an important part of your retirement plan, it usually isn't enough to live comfortably. The purpose of this is to supplement your income, not to be your sole source. Think of it as one piece of a puzzle. To maintain your desired lifestyle, you'll probably need other sources of income, such as savings, investments, or pensions. With the help of a financial advisor, you can prepare a comprehensive income plan that includes Social Security and other sources of income. 'Guaranteed Colas Are Available Every Year' Your benefits are adjusted for inflation through the cost-of-living adjustment (COLA). The Consumer Price Index for Urban Wage Earners and Clerical Workers However, there is no guarantee that there will be a COLA every year. If there is no significant inflation, there will be no adjustment. The same thing happened in 2010, 2011, and 2016. Fortunately, the COLA process is automatic. As such, Congress does not need to vote every year. 'There Is No Way You Can Get All the Money Back You Put Into the Program' This will differ depending on your circumstances, especially how long you live. As a safety net, Social Security provides a guaranteed lifetime income. Inflation-protected Social Security income provides inflation-free income for life, unlike FICA. Whether you live to 100 or beyond, you'll keep receiving payments. In addition, if you pass away before your spouse, they may be eligible for survivor benefits. 'A Person Can Outlive Their Social Security Benefits' This is simply not true. You will receive payments every month until you die. It is a federally backed, inflation-indexed, guaranteed income stream. 'For Other Programs, the Government Raids Social Security' Unlike the government's general fund, the Social Security trust fund is separate from it. Nevertheless, the government borrows from Social Security. As with other government bonds, tax revenue is invested in Treasury securities. There is no limit to how the government can use the money, but it must repay it with interest. Despite the appearance that the government is stealing from Social Security, they always repay the money, and the interest increases Social Security's assets. 'After Reaching Full Retirement Age, You Can Claim Early and Get a Bump Up' This is a common misconception. As soon as you start receiving benefits, the amount is fixed. Your FRA benefit does not increase automatically. You can, however, suspend your benefits after reaching your FRA and restart them later. As a result, your benefits will increase by 8 percent every year you delay. It's also possible to cancel your benefits within the first 12 months, repay the benefits you've received, and then claim again later. However, you can only do this once. 'Social Security Benefits Are Tax-Free' Before 1984, this was true. Benefits may now be taxed up to 85 percent, depending on your income. Depending on your overall income, you will be taxed on your benefits. The Long-Term View In retirement, Social Security is a crucial piece of the puzzle. Having a thorough understanding of it is essential for making informed decisions. Prepare for the future by running the numbers, consulting a financial advisor, and planning for the long-term. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
