When we talk about Social Security, we need to think about the long term because people are retiring later because people are living longer.
However, some reports say that Social Security will not be able to pay its bills by 2035 because their Trust fund is running out.
This is especially important for younger retirees, since those who retire in 2024 will be getting benefits for more than 11 years. So, what can be done before the aid ends?
It is important to make things clear. This does not mean that Social Security will completely fail and end the world.
It does imply that benefits will be lessened if predictions come true as planned. Reports say that retirees may get about 83% of their full benefits if Congress does not do something.
What can Congress do to prevent the shortfall of Social Security benefits?
Increasing payroll tax rates: Currently 12.4% of Social Security funding comes through payroll taxes (6.2% from employees and an additional 6.2% from employers). Congress could raise the tax rate to 15% giving Social Security a boost in funding.
Raising income ceiling: The previously mentionedpayroll taxes only apply to the first $168,600 of an individual’s income in 2024. Increasing this the tax base would increase funding.
Raising the retirement age: Other countries has progressively raised the retirement age to reduce the number of early retirees. But this measure always proves to be politically challenging as it means workers see their retirement age further away
Reducing benefits: If there are no measures to ensure that more funding is coming in. The alternative is reducing the benefits going out.
Of the steps that Congress could take. Most likely, it will be hardest to cut benefits or raise the retirement age because these changes are always unpopular and seen as “third rails.”
People think that raising the income ceiling and payroll taxes are the best options, and it is likely that Congress will choose one of them.
What can Americans do to avoid solely depending on Social Security
As there is no telling what Congress will do, Social Security is not financially stable, and the chance of benefits being cut in the next 11 years is growing.
Which brings up the question of what seniors and workers can do besides relying on Social Security? Four choices have been suggested by experts:
Invest in an income-producing portfolio: Adding dividend-yielding and income-generating stocks to your retirement portfolio is a way to allow your money to generate more money. Associated risks will need to be considered, so make sure any decisions are guided by an expert. But some stocks allow for income to be generated passively.
Part-time employment: For those that are still energetic, they can turn a profit working part-time to bridge any Social Security gaps. Or it could be a good opportunity to turn a hobby into an entrepreneurial opportunity.
Consider real estate: A rental property is a steady income when occupied. However, it does require an upfront investment that may not be within reach of some retirees. But for those that have the opportunity, with a bit of upkeep, a rental is a sure way to get a steady income.
Build other passive income streams: Options such asannuities or other fixed-income investments can provide regular payouts.
Some of these alternatives do need you to pay money up front.
Since this is the case, people who are still working should not wait and should start investing right away, even if it is just a small amount, in one of these alternatives or other options for retirement offered by other groups.
Those who save small amounts on a regular basis will not only be able to benefit from interest that builds over time, but their savings will also grow faster.
But they will be able to invest less for a longer time than people who start late and have to make up for lost time.
While it can be hard to learn how to make a variety of income streams, getting advice from a professional on which product will help your lifestyle the most is important if you do not want to rely on Social Security for your entire retirement.
