3 Spoonsful of Social Security “Sugar” Help the Bitter Pill Go Down

3 Spoonsful of Social Security Sugar Help the Bitter Pill Go Down
Photo by Mali Maeder

Time is running out on any possibility that the Social Security Trust will be able to provide the expected benefits to beneficiaries after 2033.

That is a bitter pill that Americans will have to swallow in 12 years. But there are at least three spoonsful of sugar that might help it go down (if you don’t choke).

Before we examine them, let’s take a quick look at the most current trust fund summary released in August, and get the news straight from the horse’s mouth:

The Trustees project that OASDI annual cost will exceed total income beginning in 2021—as was projected in last year’s report—and throughout the 75-year projection period. After the projected trust fund reserve depletion in 2034, continuing income would be sufficient to pay 78 percent of program cost, declining to 74 percent for 2095. [emphasis added]

People who are receiving benefit payouts after 2033 can expect a minimum of a 22% cut in payments if nothing changes.

For the retirees who rely solely on Social Security for their income, that is a severe pay cut they didn’t earn.

But cast off your gloom! Let’s examine three nuggets of good news…

The first spoonful: 24% increase in benefits

So long as the retirement age doesn’t increase unreasonably, if you wait until 70 to retire, so long as the full retirement age (FRA) is still 67, you’ll receive maximum benefits.

According to Crossroads Today, that means, “you’ll increase your benefits by 24%. Better yet, that’s a permanent increase we’re talking about — one you can enjoy throughout retirement.”

Of course, that doesn’t mean you’re getting 24% more benefits, it just means you would have waited long enough to claim the maximum benefit. (If you retire earlier, your benefit won’t quite pay out as high.)

No big surprise there: waiting longer to retire means you’ll have more money in retirement.

Okay, that one was a bit of a dud. But don’t be discouraged! Let’s move on to the next bit of good news on the Social Security front…

The second spoonful: COLA for 2022

We’ve covered the cost of living adjustment to Social Security previously. It’s not really a raise like some people say. No, it’s an effort to index benefits to inflation (in other words, an attempt to keep your spending power equal after inflation’s already had its way with you).

Another Crossroads Today article worked out the math behind a 6.2% COLA, and if it worked out, that would mean a $100 monthly raise for retirees. The same piece also figured out how many beneficiaries this would apply:

To net a $100 monthly increase in 2022, beneficiaries would need to be receiving $1,613 or more each month by the end of this year. I believe it’s fair to say that approximately 24 million recipients will see their monthly payouts rise by $100 or more in 2022.

Of course an extra $100 every month would be helpful. The only problem is, inflation has already raised prices at least $100/month (if not more).

Well, that wasn’t quite as sweet as we’d hoped. Don’t worry, though! There’s one more bit of positive news on the income front for retirees…

The third spoonful: another $1,400 stimulus check?

According to Penn Live, the Senior Citizens League is petitioning the Biden Administration for one more $1,400 stimulus check in 2021:

“Social Security benefits are one of the few types of income in retirement adjusted for inflation,” the petition states. “But soaring inflation has taken a toll on household finances of retired and disabled Social Security recipients.”

If that emergency payment gets approved, of course it will help ease the financial burden for millions of Social Security recipients. It’s certainly not a sure thing, more of a long shot really.

You’ve managed to get those three spoonsful of sugar down. Good work! Are you cheerful now? Are you optimistic that Social Security will still be around for you?

But who’s putting sugar back in the jar?

Here’s the problem: Each of the bits of “positive” news above will accelerate the trouble heading for the Social Security Trust, and may push its 13-year bankruptcy date forward significantly.

Here’s why: Every dollar that the Trust pays to beneficiaries now depletes the future cash pile for later. That’s it. Just like with your checking account, when outflows increase without a corresponding increase in your income, well, those checks are going to start bouncing sooner rather than later.

Don’t let yourself be blinded by hope that everything will work out just fine at the last minute. That some government bureaucrat with a shiny attache case and angel wings will swoop in and save the day in a nick of time. This isn’t a movie. This is your future.

We think it’s prudent to start taking steps now to help you weather the coming storm. Now is the time to shore up your retirement portfolio with proper planning and by diversifying your savings. If you can’t rely on Social Security, what can you rely on? Your own initiative, your own efforts and your own solutions.

Consider diversifying your savings with inflation-resistant assets that retain value even when the price of gas seems to double every few months. You can also consider whether retirement plans that allow ownership of physical precious metals like gold and silver are a good fit for you.

Regardless of your decision, it’s smart to make your retirement resilient while you still can.

2021, COLA, inflation, social security