You might hear stories about Social Security running out of money but I think there's some
reason for optimism. So let's take a look at some of the issues and figure out if it might be there
for you now Social Security might not be quite as generous as it was for previous generations
and maybe the current generation, but I don't know if the changes will be quite as dramatic as some
people think so if you're thinking about only getting a quarter of what your Social Security
Statement tells you or the program going away altogether, I don't think those types of things
will happen although anything is possible. I think there are several other more likely possibilities,
so let's talk about what a couple of those are. A lot of these changes might not even affect you
personally and they're really kind of complicated but inflation is just one example of changes that
can be seemingly minor, especially to a lot of people, but they have a major impact on how the
system works and they can help keep it afloat so for example, you've got inflation. The Social
Security Administration can base a variety of different numbers off of different numbers that
rise over time with inflation and the question is How fast do you make those numbers rise?
For example in 2019 you only pay Social Security taxes on the first $132,900 of your income so if
you're in less than that of course you pay taxes on everything but those who are fortunate enough
to earn more only pay taxes on that amount one way to effect the system is to make people pay
taxes on a higher income level so if we look back to I have 2013 up for example that number
was $113,700 so it has risen some over the years and the question is how fast is it going to rise
in the future. Changing that number can affect how much money comes into the Social Security system
and that can help it function better. That change doesn't affect everybody and you might only notice
it if your earnings were right near that amount and that's the type of thing that can make a big
difference in Social Security solvency without everybody seeing their paychecks suddenly cut
in half presumably you're going to increase that dollar amount at the same rate that prices rise
or the things you want to buy with your Social Security check but if one of those things goes
up faster than the other then that can make a big difference in your effective buying power
of your Social Security again it's not something you might notice in a dramatic way but it makes
a big difference in the system over the years the amount you receive might increase with inflation
and that should help you keep up with rising prices but what if your Social Security check
doesn't increase at this same rate that prices rise or another question is how do we define
rising prices so there are several different measures of inflation and the Social Security
Administration could link those increases to a certain type of inflation and it might happen to
be one that doesn't move as fast as the things you're spending money on something like that
would help them keep the program solvent longer especially if they are moving up the income limit
we talked about a moment ago faster and bringing in more revenue to the system again it's not a
dramatic and super obvious thing that people will see another possibility would be updating
how you calculate your Social Security income currently the system looks at your highest 35
years of earnings but if you add a couple of years to that you might add some lower earning years
when you were maybe earlier in life not earning as much maybe not working Social Security could
argue that people are living longer and working longer so why not make the calculation look at
more years? If that was to happen of course they would pay out less and that might end up saving
a little bit of money that can help keep the system afloat over time. I’m not saying it's
a great option or something that you want but it is one way that they could tweak some dials and
keep Social Security going without obvious major changes when people look at ways to fix Social
Security they can do the dramatic but that might make a lot of people mad instead what they might
try to do is just tweak a dial here make a little change there and when you combine the effects of
those little changes it really is quite dramatic and it does a lot to keep the system afloat I'm
not arguing that this is what's best for you but I'm saying these are ways that Social Security
could potentially stay afloat possibly being less generous but it stays afloat during that time and
finally there are those obvious changes that everybody fears the most the big reductions in
your monthly income or having to wait more years before you can take benefits those are absolutely
a possibility especially maybe if you're younger than your 50s or 40s those might be more and more
likely but I think if you're in your 60s maybe even 50s probably not as likely and instead
of those huge changes happening for the next generations I think those little tweaks that
we talked about earlier are most likely to make a difference in Social Security either way you
can make a financial plan that accounts for less generous Social Security or you can count on your
full benefits it's totally up to you I hope that helps you get some perspective on Social Security
and what you might expect in the future if you'd like to talk please let me know I'm happy to chat
with you I'm a fee-only financial advisor that means I don't receive any commissions, I can do
hourly or project work if you'd like help managing your investments I can handle that for you as well
or you can keep that and do it to yourself it's totally up to you thanks for watching