Will Social Security Be There For You?
Tim Rosen shares his thoughts on how to protect yourself from the consequences of a dwindling Social Security trust fund.
Tim Rosen: Today, the U.S. News & World report came out with their findings that Social Security is broke. And to most of you, that is no surprise. They’ve actually updated the numbers that, as of last year, they reported that Social Security is good through 2017, referring to the trust fund for Social Security. They’ve now changed that and updated it to 2016. What I’ve tried to do here at TimRosen.tv and Conservative Money Talk, is to take the news and interpret it and to share it with you in a way that you can either benefit from it or protect yourself from it. So what do we do with this news that most of you knew anyways that Social Security is broke? What do we do with that?
Well, one, if you’re already retired, you have priority here as far as your Social Security benefits go. You’re already drawing, you’re pretty much safe. For those of you that are still working and are hoping to get Social Security at some point, well, you’ve got a challenge there. Expect to see them increase the amount of Social Security that you pay into as a percentage of every pay check. Right now it’s 7.5%; you could expect that to go to 8.5% so they can make up for this deficit. You should also expect to see them draw out and extend the date, the age that you qualify for Social Security benefits.
Bottom line, what does it all mean? Don’t count on Social Security for your retirement. When it first came out it was designed to keep you from being destitute, from being hungry. And if you’re lucky enough to get some, maybe that’s what it will do. But my encouragement to you… what does it all mean? Pay yourself, build up your wealth. You can pay yourself monthly and nowadays, with online banking, ING and Direct Capital One, maybe your credit union has a savings that you can add to automatically every month. Out of sight, out of mind. You can make it happen. You can also invest in the market. There are great opportunities if you have time to be in the free markets right now and benefit over time to keep ahead of inflation and to have some resources from which to draw from to create your retirement income.
That’s today’s news.
Pump Up Your Social Security
A few days ago, CNBC’s Sharon Epperson shared her helpful advice on how to maximize your Social Security benefits.
Reporter: This morning on today’s Fountain of Youth: Maximizing Social Security Payouts. More than 52 million Americans who draw Social Security will not see a cost of living increase next year. But according to US News and World Report’ Fall Money Issue, there are ways to pump up your benefits. Sharon Epperson is the MSNBC’s personal finance correspondence. Sharon, good morning.
Sharon Epperson: Good morning.
Reporter: First, before we get to the ways to pump up your benefits, let’s talk about why no cost of living increase this year.
Sharon: No cost of living increases because it’s tied to consumer prices and consumer prices have been going down. This is the first time that there’s not going to be a cost of living increase since 1975. But President Obama is trying to urge Congress to have a $250 one-time fee paid to retirees.
Reporter: To compensate for that.
Sharon: To compensate for that, but there’s a lot of debate.
Reporter: But that may or may not pass.
Sharon: It may or may not pass.
Reporter: Okay, so let’s talk about what we need to do, then we’ll know what we need to do in terms of pumping up our benefits. You talk about delay claiming benefits and we’ve got a graphics here to tell you why it’s so important. Read more
Social Security Establishes Financial Literacy Research Consortium
Research Centers Will Develop Innovative Ways to Help Americans Plan for a Secure Retirement
Michael J. Astrue, Commissioner of Social Security, today announced the establishment of a new Financial Literacy Research Consortium (FLRC), made up of research centers at Boston College, the RAND Corporation, and the University of Wisconsin. The FLRC, supported through five-year cooperative agreements, will develop innovative materials and programs to help Americans plan for a secure retirement.
“We have a responsibility to help the public understand the role of Social Security benefits and the need for them to save as they plan for their future,” said Commissioner Astrue. “Consequently, we have launched a research initiative to better inform the public about retirement saving options.”
The FLRC will tailor materials for Americans at different stages of their working lives – new workers, mid-career professionals, near-retirees, and those who have already left the workforce – to address the different challenges these individuals face. The FLRC also will help traditionally underserved populations better understand the path toward a secure retirement.
“The consortium constitutes an impressive collection of expertise and resources with a deep understanding of issues related to financial literacy,” Commissioner Astrue said. “We look forward to building a strong partnership with the FLRC as well as with other federal agencies with similar missions. In these challenging economic times, this partnership will help Americans to solidify their financial future.”
The Need for Social Security
Lady Narrator: While the economy worsens, the future of Social Security remains uncertain. As many baby boomers approach retirement age, the funds are shrinking and expected to vanish. At the Covello Senior Center, many retirees share their concerns about this problem.
Milagros Ruiz: You know, we need that check. What are we going to live for? I will be in the street because how would I afford gas, electricity and other bills. How else would I be if not for that? Maybe I will have to live in a shelter.
Lady Narrator: Some economists say the future problems Social Security faces are due to the spending and lending of the $1.5 billion in surplus it had into the less people paying taxes after all baby boomers retire. Those who depend on that monthly check talk about what it would be like without it.
Maria Rivera: It will be very difficult for me to survive without those benefits because it helps you, you know. It’s part of all the years in the labor force. It’s money that we have worked for and the help we receive here is very important and very essential because without it, life would be even more difficult for us.
Lady Narrator: Keeping in mind the not too positive future the next generations will face when they retire, some of these seniors made a recommendations based on their own experiences.
Jorge Rivera: I wish I would have had a better job when it was time to retire. If I had known, I would have prepared to have a better job and to save money, so that I would have had something set aside for my golden years.
Milagros Ruiz: There are many people who didn’t think and spent all their money instead of saving it for their retirement. They just spent it all, but you should save. That’s why people no longer went to retirement early because they don’t have enough money and they would get less benefits, so they rather work until the last days, but the sad thing is, that those who work the longest, usually die the soonest.
Worried about Social Security and your retirement?
If you’re worried about Social Security and your retirement, you should be. Hi, I’m Tom Cock from Merriman and let’s talk about the Social Security System. Remember this is a pay-as-you-go system. In other words, dollars are supposed to come in, dollars are supposed to get paid out. Unfortunately, the government, of course, has put IOUs against most of that money and has used it for other things, and we’ve got some bad news here in the past few days.
We learned that Social Security, the giant trust fund, is expected to run out of money by the year 2037 and will be net negative by the year 2016. Years earlier, that had been expected and the reasons why are pretty easy to understand; we’re in a recession, there are few people working, fewer people paying into Social Security and part 2 is the 78 million baby boomers, of which I am one, are getting older and they’re starting to draw on Social Security. Read more
“Just like you and I, Social Security is going to change”
Nicole Livas: 10 On Your Side wants to help you plan for a comfortable retirement. So we headed to Langley Federal Credit Union to sort out part of a Social Security mystery.
Tom Schaad: It’s a financial forms set up to explain the current status of Social Security and what it may hold for your future. 10 On Your Side Eric Harryman joins us now with more on what you can do now to prepare.
Eric Harryman: Tom, Nicole, it comes down to realistic expectations and staying informed long before retirement age. Don’t get me wrong though. The daunting question of “Will there be any money left when I retire?” remains. But the experts say, “Worry less, plan more”.
Commentator: With the US economy in crisis mode, many believe Social Security could disappear.
Marsha Kilburn: Are there going to be funds there when we are ready to retire?
Read more
Barbara Kennelly on Social Security and Medicare Trustees Report
News Anchor: Joining us now with her reaction is Barbara Kennelly, the President and CEO of the National Committee to Preserve Social Security and Medicare. She is a former Congresswoman from Connecticut who is a ranking member of the Social Security sub-committee and a former counselor to the Social Security Administration.
Miss Kennelly, welcome to Bloomberg news, and Lindsey’s report painting a very dire picture. The trustees saying that Social Security fund would be depleted by 2037.
Barbara Kennelly: Well Earl, first of all, all this reporting on Social Security is dire. The fact of the matter is that last year the trustees said that Social Security could pay full benefits to 2041. Now they’re saying 2037. Would you notice that that’s three decades away? The whole program has been planned for the long term to have these kind of economic cycles going up and down. In the 1990s Social Security could only pay up to 2000 say. But no, Social Security is not going bankrupt. Social Security has a surplus. It can pay full funding till 2037, that’s what the trustees are going to tell you. And then after that…
News Anchor: Where is the disconnect between what you’re saying and some of the things that Lindsey was telling us over in that report?
Barbara Kennelly: Well, Lindsey is reporting as people report and say, “Hey, the number went from 2041 down to 2037″. And yeah, that is a drop and are we surprised? No, we have a recession. Are we surprised that tens of thousands people have been laid off and are not paying into the payroll tax. But the Social Security program has been designed specifically to have these economic going up and going down. I was on the committee in 1983 the last time we reformed it. We raised the payroll tax, we raised the age because we knew the baby boomers were coming.
So no, Social Security is not going bankrupt. Do we have a problem right now? We have a fiscal problem. We’ve got a deficit problem. We don’t have a Social Security problem because we have that surplus. Think of the good years we had in 2005, 2006, 2007, 2008. So much more money was coming in to Social Security from payroll taxes than was going out. That built up the surplus. So that’s the base we have right now. That’s why we can go up to 2037 and say Social Security can still pay its benefits. Read more
Do you worry about your Social Security and Medicare?
TV Interviewer: Are you worried about your Social Security and Medicare?
Man1: Not particularly, because the risk of insolvency may seem a bit closer today than yesterday, but I have faith that the government can enact reforms to force through all that.
Woman 1: Absolutely.
TV Interviewer: How so?
Lady1: I don’t think it’s going to be there by the time I retire.
Man 2: A little, I won’t say a lot because I am sure that there will be some resolution to it.
Man 3: I wouldn’t say worried, I’m just not confident I am going to receive it. I am making other plans, that’s why I am not worried.
TV Interviewer: Would you prefer to see an increase in taxes or reduction in benefits to help solve this problem?
Man 4: Realistically I think it is going to have to be a combination of both. That the Americans that can most afford it need to have their benefits reduced, and perhaps the tax rates and some of the income levels that… like hedge fund managers that get theirs at a reduced rate of taxation… maybe should pay the full rate of taxation and Social Security.
Man 5: The reduction in benefits is probably going to be more feasible. I don’t know which, they’re both not a very good solution but, you know, of those two that’s the one I would prefer.
Woman 2: I think unfortunately an increase in taxes is the only answer.
Man 6: Probably a combination of both. Some decrease in benefits and some increase in taxes to pay for it. That’s seems to me like a reasonable solution.
TV Interviewer: Do you think we should revisit the idea of privatizing Social Security?
Lady 3: Ha, ha, ha. I don’t think we should revisit the idea of privatizing anything. The era of privatizing, of taking the responsibilities of government and farming them out to the lowest bidder who winds then jacking up the prices on the private citizen is just outrageous.
Man 7: Yes, I do think that despite the fact that the Bush plan was based on the assumption that stock markets would always rise, which turns out not to be the case, a system more based on individuals makes more sense.
Lady 4: Look what we’ve done on Wall Street and look at the mess we are in now. I don’t think giving it to individuals will help the situation any better.
Man 8: It hasn’t worked so well with the government so maybe we should give privatization a try.
What about our readers? Do YOU worry about your Social Security and Medicare? Post your comments below.
Will my Social Security benefits change at full retirement age?
Senior Citizen: I received Social Security disability benefits. Will my Social Security benefits change when I reached full retirement age?
Social Security Representative: The benefit information will change, but you won’t really see it. The interesting thing that some of our clients don’t understand is that Social Security disability is calculated, you know, the amount, is how much an individual would get at full retirement.
So if you get disability, say you’re 55 and you go on disability, then when you get to be 62 and you start thinking about a retirement benefit, the retirement benefit is your full retirement reduced. Well, you went and switched over to your retirement benefit. So our client doesn’t have to do anything while they are on disability. What we do is that when they get to be full retirement age, then we change the disability wording on their record to say retirement, because nothing works than sending somebody a disability update package and they’re 70.
Senior Citizen: Right.
Social Security Representative: You know, that’s why we take that information off. We correct our records because we keep track of our clients based on what we need to do for them and if they’re past full retirement age, we never need to update their disability information.
Senior Citizen: Okay.
Should I retire at age 62 or 63?
Senior Citizen: If I start my retirement benefits at age 63, is the amount I would get the same as age 62?
Social Security Representative: I like to use this question here because the answer is something that most people should just kind of understand, but sometimes people get pension systems mixed up. Social Security does not have a fixed amount for an individual when they get to be 62.
In fact, with my sister, up in Canada, they have a fixed amount that an individual gets because of being a worker in Canada and then you get something above and beyond that. Well, for workers in the United States, we look at how much you’ve earned and paid into the system to figure out how much you’re going to get.
We send out a benefit statement every year. That’s what people need to do. Pull out their benefit statement, you look to see what your benefit is at age 62, what your benefit would be at age 66, if that’s your full retirement age. Well, for that four years, if your difference is $480 and there are 48 months there, well, then you know that your benefit is going to increase $10 per every month that you wait and hold off retirement from age 62.
So do the math, do look at that benefit statement because that’s the first place that you need to start looking when you start doing some retirement planning and you don’t have to wait until, you know, a date of birth. You don’t have to work until January. Sometimes retirement plans are, you know, personal.
Senior Citizen: Right.
Social Security Representative: You know, maybe October is the right time to go out on retirement for you and you can find all that information on our website to help make those decisions.
Senior Citizen: It’s awfully hard to get along anymore without the access to the Internet, isn’t it?
Social Security Representative: Well, and that’s the thing is that if you’re paying for Internet access and you have it at home, use it.
Senior Citizen: Right.
Social Security Representative: Also, we’ve talked to a lot of individuals where the libraries have got Internet access. We have some tribal council organizations that make Internet access available to their members and so use the access where you have availability, but be, you know, safe. Be sure to come right into our website, socialsecurity.gov.
Senior Citizen: Okay, thank you, Mark.
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