Wealth Management

Will Social Security be there for me when I retire? Here’s how the agency’s chief actuary answers that common question

Thomas Barwick

When it comes to Social Security, many people have one question: “Will my benefits be there when I retire?”

Fears that the program could run out of money tempt some people to claim benefits as early as possible to get back the funds they have paid into the program for their retirement.

Meanwhile, beneficiaries who are already receiving monthly checks may worry that their income will come to a stop.

In a new interview released by the agency last week, Social Security Administration Chief Actuary Stephen Goss sought to reassure people with regard to those doubts.

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“It’s a long way from not having any money to pay for any benefits,” Goss said of the program’s funding.

“So, people should not worry about the trust fund running out of money, as is sometimes said, and having an inability to pay any benefits,” he said.

What may happen in the worst-case scenario

Yet it is possible benefits may be reduced.

In the worst-case scenario, Social Security may reach a point within 10 years where the program may only be able to pay about 80% of scheduled benefits, Goss said.

Today, Social Security has two trust funds that have a total of $2.8 trillion in reserves and function like savings accounts for the program, according to Goss. The trust funds collect any extra money that comes into the program. When more money is needed to pay benefits beyond what is coming in through payroll taxes, the trusts funds are available.

But projections show the $2.8 trillion reserves will be used up around 2033 or 2034, Goss said. At that point, the income coming into the program will be less than what is required to pay benefits under current law.

Social Security’s actuaries are responsible for estimating the future costs of benefits that must be paid and comparing that with the amount of revenue projected to come in, according to Goss.

When there is an imbalance, as with the current projected shortfall, it is up to Congress to make changes.

Some lawmakers have started to propose potential ways of approaching the problem. Both Republicans and Democrats will have to approve any changes for them to become law.

Yet even with looming benefit cuts, most experts say it’s generally best to wait to claim retirement benefits.

The decision to wait is really buying longevity insurance from Social Security.
Laurence Kotlikoff
Boston University economics professor and creator of Maximize My Social Security

By waiting to age 70, retirees stand to get the biggest monthly benefit checks, according to research from experts including Laurence Kotlikoff, a Boston University economics professor and creator of Maximize My Social Security, a claiming software tool.

Retirement benefits taken at age 70 are 76% higher, adjusted for inflation, than retirement benefits taken at 62, Kotlikoff’s research found. This holds true even as the retirement age gradually climbs higher, to 67.

“The decision to wait is really buying longevity insurance from Social Security,” Kotlikoff recently told CNBC.com.

How to check your benefit eligibility

Even if you’re many years away from retirement, you may be able to get an estimate now of how much your Social Security benefits may be in retirement.

By signing up for a My Social Security account online, you may access your record that shows your personal earnings history beginning with your first job, according to Goss.

With that information, the Social Security Administration provides estimates of how much in benefits you may receive if you become disabled, retire or die, thus leaving benefits to eligible survivors.

“The benefits that are indicated here are the benefits that are expected to be provided under current law with sufficient financing to pay for them,” Goss said.

“These give a very, very good indication to individuals of what they might get in the future,” he said.

Importantly, those estimates are expressed in today’s dollars, such as the current value of your earnings today or the cost of shopping at the grocery store. So if you’re 35, with another 30 years to your anticipated retirement, the estimate you see will change.

“The amount that you would actually get 30 years from now will, of course, be much higher as the cost of living in general will be rising,” Goss said.

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