Social Security benefits help millions of Americans make ends meet in retirement. The average retiree collects just over $1,500 per month in benefits, according to the Social Security Administration (SSA), which can provide much-needed financial relief for many households.
However, older adults are growing more concerned about the future of Social Security. In July of this year, around 29% of Americans age 70 and older were worried about Social Security drying up, according to a survey conducted by SimplyWise. As of November, however, that number has jumped to a whopping 71%.
The truth is that Social Security is experiencing cash problems right now. That said, there are reasons to be optimistic about the future.
How secure is Social Security?
Much of the news surrounding Social Security over the last few months has been largely negative, and many workers are worried about the program going bankrupt and benefits disappearing. But there's good news and bad news about Social Security's situation.
The bad news is that there is a cash shortage. The SSA funds benefits primarily through payroll taxes. And right now there are so many older Americans retiring that the money coming in from taxes simply isn't enough to cover benefits. To cover the difference, the SSA has been tapping its two trust funds. Those funds will be depleted by 2034, however, according to the SSA Board of Trustees.
Once the trust funds run dry, payroll taxes alone will have to cover benefit payments. The good news is that as long as workers continue paying their taxes, retirees will continue receiving at least some money in benefits. Once the trust funds are depleted, though, payroll taxes will only cover around 76% of projected benefits, according to the SSA.
So what does this mean for retirees? It means benefits won't disappear entirely, even if Congress can't find an answer to the problem before 2034 and the trust funds are depleted. However, if that happens, you might receive less than you expect in benefits.
Protecting against benefit cuts
Fortunately, there are a few ways you can collect more from Social Security just in case benefits are reduced in the future.
One option to boost your benefits is to delay claiming. You can file for benefits at age 62 or any age after that, but the longer you wait up to age 70, the higher your payments will be. Waiting until age 70 will result in collecting your full benefit amount plus up to 32% extra every month, which can act as a cushion if benefits are reduced.
Working longer or increasing your income can also result in larger checks. Your benefit amount is determined by taking an average of your wages over the 35 years of your career where you earned the most. That average is then adjusted for inflation, and the result is how much you'll receive by claiming at your full retirement age. If you work for more than 35 years or pick up a second job to boost your income, that will increase your benefit amount.
Older Americans are losing confidence in Social Security, but the problem isn't as bad as it may seem. Although the program is experiencing a cash deficit, benefits aren't going away entirely. And if you take steps to increase your monthly payments, that can help protect your benefits in retirement.