2 Big Reasons Social Security Is Failing Seniors | Smart Change: Personal Finance | wcfcourier.com – WCF Courier

Social Security benefits are a lifeline for millions of retirees. In fact, around 23% of workers expect their monthly checks to be their primary source of income in retirement, according to a 2022 report from the Transamerica Center for Retirement Studies.

However, Social Security isn’t as reliable as it used to be, and it’s becoming more difficult for retirees to depend on their benefits. There are two key ways that the program is failing seniors, and if you’re already retired or planning to retire soon, you may need a backup plan.

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1. Benefits are failing to keep up with inflation

Most years, seniors receive a cost-of-living adjustment, or COLA, to help their benefits keep up with inflation. That adjustment generally falls between 2% and 4%, but last year, retirees received a whopping 5.9% COLA to account for surging inflation near the end of 2021.

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However, the actual inflation rate is around 8.5% over the past 12 months, according to the most recent data from the Bureau of Labor Statistics. That means that over the past year, benefits have lost buying power — even with a larger-than-average COLA.

This isn’t a recent issue, either. In fact, Social Security benefits have lost around 40% of their buying power since 2000, according to a 2022 report from The Senior Citizens League. If this problem persists, Social Security won’t go nearly as far in the future.

2. Cuts could be looming

In addition to inflation, Social Security is facing another issue: a cash shortage.

Benefits are funded primarily by payroll taxes. However, with baby boomers retiring in droves and the average retiree living longer, the Social Security Administration (SSA) has been paying out more money in benefits than it’s receiving from taxes.

As a result, the SSA has been dipping into its trust funds to cover the deficit and avoid cutting benefits. But those trust funds are expected to run dry by 2034, according to the latest estimates from the SSA Board of Trustees. When that happens, taxes will only be enough to cover around 77% of future benefits.

To be clear, this doesn’t mean Social Security is going bankrupt. As long as workers continue paying payroll taxes, there will always be at least some money to pay out in benefits. It does mean, though, that benefits could be cut by up to 23% by 2034 if lawmakers can’t agree on a solution before then.

What you can do to prepare

There may be nothing you can do to stop inflation or prevent future benefit …….

Source: https://wcfcourier.com/business/investment/personal-finance/2-big-reasons-social-security-is-failing-seniors/article_82999ac0-98b2-556c-9edb-4eca5f79e166.html

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