A lot of people today are worried about the future of Social Security. And that's understandable. That's because the program is facing a serious financial shortfall that needs to be addressed soon.
In a nutshell, Social Security is anticipating a mass exodus of baby boomers from the workforce in the coming years. Once that happens, the program is likely to see a reduction in its payroll tax revenue.
That revenue, though, is Social Security's primary means of funding. And if baby boomers exit the workforce in droves, and too few workers come in to replace them, it's easy to see how that could lead to a major financial crisis.
Image source: Getty Images.
Now thankfully, Social Security has trust funds it can raid to keep up with scheduled benefits for a period of time. But those trust funds could be out of money in a little more than a decade. Once that happens, benefit cuts could be on the table.
Clearly, the consequences there could range from unfortunate to financially catastrophic for current and future retirees alike. The good news, though, is President Biden is committed to shoring up Social Security's finances and making sure the program is around for those who are apt to depend on it.
Biden is intent on protecting Social Security
During his Feb. 7 State of the Union Address, Biden made it very clear that keeping Social Security and Medicare around is a big priority for him. And he also made it clear that he's going to push back against lawmakers whose actions seek to compromise either program in any way.
Here's what Biden said:
Social Security and Medicare are a lifeline for millions of seniors. Americans have been paying into them with every single paycheck since they started working. So tonight, let's all agree to stand up for seniors. Stand up and show them we will not cut Social Security. We will not cut Medicare.
He continued:
If anyone tries to cut Social Security, I will stop them. And if anyone tries to cut Medicare, I will stop them. I will not allow them to be taken away. Not today. Not tomorrow. Not ever.
That's some pretty strong language. But it should also give current and future retirees some amount of comfort.
Now, this isn't to say that Biden is going to be the president who puts a plan in place to prevent Social Security cuts. While he'd perhaps like to, his proposal to impose Social Security taxes on incomes above $400,000 is likely to be met with resistance.
But there are other proposals lawmakers can look at to shore up Social Security. One, for example, is pushing back the full retirement age, which is when seniors are allowed to start collecting their monthly benefits in full.
Full retirement age is currently set at 67 for anyone born in 1960 or later. But pushing that age back to 68 or 69 could be a huge help to Social Security. And given that Americans are generally living longer these days, it's not such an unreasonable proposal.
Have a backup plan
Clearly, Biden is committed to doing all he can to ensure that Social Security is able to continue paying benefits. But whether he or future leaders can prevent benefit cuts is questionable.
As such, workers today should make every effort to boost their own personal savings so they have money to access in retirement in case benefit cuts do come down the pike. That could mean steadily funding a 401(k) plan through work or contributing to and managing an IRA independently.
There's really no reason to worry that Social Security will go away completely. But benefit cuts are a distinct possibility every worker today needs to come to terms with. Saving steadily and consistently for retirement could be the ticket to avoiding a financial crunch later in life.
