“I Have No Choice” But to Keep Working

Elderly man riding public transportation
Photo by Ashley Light

There’s no doubt that the Social Security benefits that hard-working Americans have paid into for decades are under incredible pressure.

If nothing is done except “kicking the can down the road,” by 2035 retirement savers won’t be able to count on the entire benefit they’re entitled to.

Thankfully, Social Security isn’t expected to be an investment, or there would likely be a much nastier discussion on top of the one we’re already having. The reality is already nasty enough.

“I have no choice” but to keep working

For example, Nancy Reynolds, a 74-year-old “retiree” has to keep working as a Wal-Mart cashier just to stay afloat. She’s quoted by The Guardian:

I can’t live on $709 a month, so I have to work. I have no choice, even though my body says you can’t do much more.

Another American, unable to work due to a chronic illness, was ready to pull up stakes: “Moving abroad to a country with a lower cost of living was my only realistic option to survive,” concluded 49-year-old Rocky Giammatteo. He receives Social Security disability benefits because his multiple sclerosis diagnosis makes most forms of work impossible for him.

“The nation is really facing a retirement income crisis, where too many people aren’t going to be able to retire and maintain savings to live on,” said Nancy Altman, president of Social Security Works.

Keep in mind, if you make more than $25,000 annually ($32k married filing jointly), then your Social Security benefits are taxed, so people in Reynolds’ situation have limited income options. Even if they can find a job paying over $12.50 or so an hour, taking it might actually cost them money. (Even more, if working poses any sort of health challenge.)

Individual, real-world challenges like these look even worse when you consider the already dire financial challenges that Social Security is facing by 2034 (or earlier). Michael A. Peterson, CEO of the Peterson Foundation, made an alarming statement about the overall state of Social Security in 2019:

The Social Security retirement program will become insolvent by 2034, at which time beneficiaries will receive an immediate 23 percent cut. […] Medicare is also on a disturbing path, as its hospital insurance program will become insolvent in just 7 years, which would jeopardize healthcare for 73 million Americans.

As we’ve reported frequently, things haven’t improved in the last two years.

Hopefully leaders can figure out a viable solution to the huge Social Security problem that doesn’t involve taxing workers to death or raising the retirement age much higher.

In fact, an outside consultant might, after reviewing the current state of Social Security, just throw up her hands and recommend we start over…

Why we can’t give up on a failing system

It would be more than challenging to scrap Social Security to move forward with another idea. Fully 97% of elderly either already rely on it (or will).

If nothing is done to rescue the program’s main benefit — the replacement of income — then that replacement rate will inevitably decline because full retirement age is already scheduled to rise:

Social Security benefits replace about 40 percent of past earnings. This “replacement rate” will slip to about 35 percent for a medium earner retiring at 65 in the future, chiefly because the full retirement age, which has already risen to 66, and is gradually climbing to 67 over the 2017-2022 period. [emphasis added]

Elderly folks who are already having trouble trying to replace the other 60% of their annual income would see even the smallest drop in Social Security benefits as a financial catastrophe.

In addition, for millions of elderly people Social Security benefits are all that keep them out of poverty.

According to the Center on Budget and Policy Priorities report:

For about half of seniors, it provides at least 50 percent of their income, and for about 1 in 4 seniors, it provides at least 90 percent of income, across multiple surveys and the study that matches survey and administrative data. [emphasis added]

Let’s be very clear: no one should rely on Social Security alone. But if nine out of every ten seniors already is, something has to change.

For now, those changes to the program are for lawmakers to figure out. Let’s focus on what we individual Americans can control: our own financial plans, and possibly a Plan B…

Don’t stand on a rug that may be yanked out from under you

While lawmakers and other bureaucrats try to hash out their plans to save Social Security from annihilation, and our impoverished elders from destitution, keep this in mind:

Inflation will likely outpace cost of living adjustments for the foreseeable future. That’s likely to be the case no matter how high the 2022 COLA turns out to be. It also doesn’t account for any differences between the Fed’s preferred inflation metric and the day-to-day inflation you see eating up your income.

So when you’re preparing your personal financial plan, consider diversification into assets that hold up well against inflation, for spending power the Federal Reserve can’t steal. (No matter how wildly inaccurate their inflation metric underestimates your personal cost of living.)

Physical precious metals could be part of your diversification plan. That way, when you need money, you can have confidence that the “store of value” gold and silver provide will be sheltered from the ravages of inflation. As Mark Twain famously put it:

“I am more concerned about the return of my money than the return on my money.”

If you share that concern, owning physical gold might be the safe haven you’ve been looking for.

2021, Featured, inflation, retirement plan, retirement savings, social security