Extra extra read all about it!

What’s truth?  What’s hyperbole?  Lately there have been a number of articles written in regards to the Solvency of Social Security.  The question then is what is the REAL truth and how do today’s headlines affect peoples, beliefs and attitudes in regards to Social Security benefits and claiming strategies?  The Center for Retirement Research at Boston College last month conducted a study and published a white paper titled “Does Media Coverage of the Social Security Fund Affect Claiming, Savings and Benefits Expectations?”  And the answer was unequivocal YES!

The survey was conducted with 4 separate groups, the Control Group was told that Social Security has a long-term financing shortfall, but the other 3 groups were given the same exact contents as the Control group, but the headlines were different.

  • The Social Security Trust Fund Will Deplete Reserves in 2034
  • Social Security Fund Headed toward insolvency in 2034
  • Revenues Projected to Cover Only 75% of Scheduled Social Security Benefits After 2034

What I find interesting is that respondents in all 3 groups stated that they plan to claim 1 year earlier than the Control Group that was only given the contents of the article.  None mentioned increasing their monthly retirement savings or working longer.

What is the truth?

According to Social Security Board of Trustees the OASI Trust Fund has a balance of $2.908 Trillion an increase of $11 Billion in 2020.  The trust fund will be depleted in 2034 with no changes between now and then.  Benefits will be reduced by 22% at that time.  In 2020 for the first time since 1983 the outflow to beneficiaries was great than the inflow from workers, thus they will begin dipping into the surplus.

Now we all see how well our politicians are getting along in Washington DC, but that in and of itself is a function of who is reporting the sol called news!  I think it’s fair to say that eventually they will get together as they did in 1983 to make changes to Social Security that will put it on firm ground.  There are 2 key points to keep in mind;  #1 They won’t act until they have to, before any benefits would be cut.  #2 They will want to get re-elected so they will not make changes to benefits for those already receiving them or people relatively close to retiring (my estimate 55+)

Possible Solutions to keep Social Security Solvent

  • Increase FRA from 67. In 1983 the FRA was 65, it was changed to 66 or 67 but did not affect any individuals who were over 50 years of age.  When Social Security was first established in 1935 benefits were to begin (FRA) which was age 65.  Life expectancy in 1935 was only 62 so the vast majority of American’s either didn’t make it or died relatively soon thereafter.  With average life expectancy for someone turning 65 today they are projected to live to 78 – 80 years old.  Now remember that is the AVERAGE and who amongst you is average?  I can see the FRA gradually increase to 68 to 70 for those who are not yet 55.
  • Change to amount of Earning subject to Social Security (FICA) taxes. It’s been increasing almost every year and will go from $142,800 this year to $147,000 in 2022.  Now only about 6% of American’s make more than $147,000 so the vast majority will pay FICA taxes all year.  The Democrats have proposed that FICA taxes would stop at $147,000 for everyone, but would start again at $400,000 and above for high earners, thus creating a donut hole and keeping to their promise of no tax increases for those earning less than $400,000.
  • Make all income including capital gains, interest and dividends subject to FICA taxes.
  • Increase the FICA (Social Security and Medicare) from 7.65% by .10% per year for 20 years. As you all know the total tax is 15.3% with half being paid by the company and the other half paid by the individual, and woe to us who own our own businesses where we pay both sides.
  • Change the COLA formula from a wage based adjustment to actual cost of living adjustment for retirees.

Anyway, these are just my opinions as to what might change to keep Social Security Solvent for decades to come and as we all know we all have our own opinions and thoughts.  My main interest is to educate folks prior to claiming as to what might happen and proposed changes.  I don’t see any changes for those of us who are already claiming or close to claiming, I see a gradual increase in the FRA and the amount of income subject to FICA taxes and or the FICA tax rate.

Remember the main objective for a politician is to get REELECTED, and none want to see 70 million senior citizens protesting cuts to their Social Security benefits!!!!!!!

“The Only Thing We Have to Fear is Fear Itself”  Franklin D. Roosevelt  1st Inaugural  Address 1933


2022 benefits will be increase by 5.9% and for those not yet claiming this 5.9% is included in their future projected benefits.  So, if your currently earning delayed credits of 8% per year between ages 66 -70 you’ll be looking at a 13.9% increase in benefits when you do claim!  That is WHY we wait!

Average Social Security benefits paid to retirees $1,657/mo. or an increase of $92/mo. next year.  Many of you and your clients will have benefits much greater than this number!

I recently read that there was a 17% increase or 400,000 more Social Security recipients who died last year vs. 2019.  It is estimated that 375,000 of those were COVID related.  Now once again is this TRUE or is this HYPERBOLE?  How many of those folks had major life threatening physical issues?


I’ll let you decide!

Have a great month,

Dave Zander, CFP®
MLS# 1603774