Social Security, established in 1935, provides financial benefits to the elderly, disabled, and disadvantaged groups. However, there are concerns regarding its sustainability.
Social Security is particularly concerning among younger generations who are not yet receiving benefits and must continue paying SSI taxes despite their future benefits being reduced or, at worst, discontinued. So, should you be concerned about the state of Social Security? The answer, while multifaceted, tends to lean toward the affirmative.
Reasons for concern
There are several reasons for concern about Social Security's sustainability.
Demographic changes—The number of baby boomers born between 1946 and 1964 are reaching retirement age, and their numbers are significant. As they draw Social Security retirement benefits, fewer workers contribute to the program, straining the system's financial resources.
Longer lifespans—Due to advancements in healthcare and technology, People are living longer than ever. While longer lifespans are a positive development, they also mean that individuals draw upon Social Security benefits for extended periods. This increased longevity, combined with the influx of retiring baby boomers, puts increasing pressure on an already burdened Social Security system.
Economic climate—The current economic climate further complicates the issue. Economic uncertainties and lower interest rates have resulted in lower returns on investments that form a substantial part of the Social Security trust fund. The Congressional Budget Office predicts that the fund's reserves could be depleted by 2034 without action.
Social Security reform and politics
Reforms are being proposed to help work toward its continuation. These include increasing the retirement age, changing the formula used for benefit calculations, raising the payroll tax cap, or combining these measures.
However, the political division surrounding the issue complicates reform efforts. Social Security has long been an issue in American politics, but little progress has occurred despite the looming crisis. This political gridlock should also concern the American people.
Preparedness is critical
While Social Security is not on the verge of immediate failure, its long-term prospects without substantial reform are worrying. The pressing question for citizens and policymakers alike is not whether we should be concerned about Social Security but rather what can be done to help its survival and effectiveness in providing financial support as intended.
The issue of Social Security being available for future generations requires attention. Future generations face later benefits start ages and a reduced benefit amount compared to those already receiving benefits. Therefore, working with a financial professional to devise a plan for retirement income without Social Security benefits is vital.
Sources:
https://www.pgpf.org/article/without-reform-social-security-could-become-within-the-next-decade/