If you've heard the rumors that Social Security is in the process of going broke, the good news is that's not what's happening. Social Security is most certainly facing some financial challenges. In the coming years, it expects to owe more money in benefits than it collects in revenue.
The reason for this is that Social Security's main source of revenue is the payroll taxes workers fork over on their earnings. But now that baby boomers are staging a mass workforce exodus, that revenue stream is shrinking. To make matters worse, in the coming years, boomers will no doubt be filing for Social Security benefits because, well, they're entitled to them.
Now Social Security can tap its trust funds for a number of years to keep up with scheduled benefits. But once those funds run out of money, which is expected to happen in a little more than a decade, benefit cuts will be on the table.
Image source: Getty Images.
That's something I'm super frustrated with, even though I'm not even collecting Social Security myself.
It's just not right
The fact that Social Security is facing a revenue shortfall is not news. The program's trustees have been sounding warnings for years, and so far, lawmakers have yet to do anything about it.
Sure, some have introduced different proposals designed to help shore up Social Security's finances. But no action has actually been taken. And the clock's running out on the program's trust funds, so if lawmakers don't do something soon, benefit cuts will be unavoidable.
That bothers me not for my own sake, but for the sake of the millions of Americans who currently look to Social Security as their primary source of income. Many of my friends' parents are retired and rely heavily on Social Security to make ends meet. I'd hate to see their already modest lifestyles get upended due to Social Security cuts.
In fact, I was talking to the father of a college friend recently. He's in his 70s, has been retired for a handful of years, and resides in the home my friend was raised in. While he doesn't have family around, he has the company of his neighbors to enjoy. And he appreciates the familiarity of a neighborhood he's lived in since his 30s.
My friend's father told me that if Social Security were to cut benefits, he'd be forced to downsize, leave the New York metro area completely, and move someplace cheaper. Now it's one thing to do all of those things because you want to. But imagine being forced out of not just your home, but your home state, due to Social Security cuts.
It's a terrible thing. And it's really unfair to those seniors who depend on their benefits heavily today.
Future recipients at least have options
The idea of getting a smaller Social Security benefit doesn't bug me so much. Would I rather get more money from the program than less after spending years paying into it? Absolutely.
But I also know that I at least have an opportunity to try to build more savings to make up for Social Security cuts. Current retirees don't have that option. And it's just not fair to subject them to that financial stress.
As such, I really hope lawmakers will manage to step up soon and figure out some way to avoid slashing benefits. And I hope they recognize just how badly they have to prioritize this for the sake of those seniors who stand to get very hurt financially in the event of Social Security cuts.
