The COVID-19 pandemic has paved the way for new financial concerns and worries. According to a survey conducted by Country Financial, approximately 61 percent of Americans said that COVID-19 has made it harder for them to set aside money in savings and investments. The same study showed that roughly half of the population surveyed admitted that their level of financial security has worsened since the pandemic started. The coronavirus crisis has economically impacted everyone in one way or another, and according to The Motley Fool, those who are planning on retiring soon may be among the most vulnerable when it comes to social security benefits.
Another survey conducted by SimplyWise demonstrated that the majority of the participants are mostly worried about social security drying up. This was the biggest concern, while 49 percent worry about outliving their savings, 44 percent are concerned about daily living expenses, and 43 percent are anxious about the cost of healthcare. People are rightly concerned about social security, considering the fact that the program is experiencing a cash shortage. However, the problem may not be as bad as It seems.
As baby boomers continue to retire and older retirees live longer lives, the influx of money coming in from taxes is not enough to cover the benefits that need to be paid out. The Social Security Administration (SSA) relies on payroll taxes to fund benefits, and this has been affected by a limited input of tax money, which has resulted in the SSA tapping its trust funds to stay away from making benefit cuts.
The SSA Board of Trustees calculates that those trust funds will be depleted by 2034. By that time, payroll taxes will only account for 76 percent of future benefits, which could result in benefit cuts of around 25 percent for retired people. The coronavirus pandemic could worsen the problem as more Americans become unemployed, reducing the amount of money coming in from payroll taxes. As the SSA continues to rely on their trust funds to respond to the pandemic, funds may begin to dry up.
Fortunately, it is very unlikely that the social security program will run out of money entirely. This will continue to be true as long as there is some money coming in from payroll taxes and there is cash that can be payed as benefits. This means that even if there are cuts, you can still depend on social security to a certain degree when you retire. However, you may have to adjust your retirement strategy and expect your monthly checks to be reduced. According to The Motley Fool, the wisest strategy may be to plan your retirement assuming that the majority of your income will come from your savings.
In order to calculate how much you will receive from social security benefits, you can check your statements by creating a personal MySocialSecurity account on the SSA website. This would be a partial estimate that won't take into account the potential benefit cuts. The website will also assume that you will retire at the age of 66 or 67, depending on the year that you were born. If you retire earlier, you may see a larger cut in benefits, as opposed to retiring at an older age. The COVID-19 pandemic may have threatened social security, but the program will continue to stay in place.