Social Security has been one of the much talked about topics in the United States recently after it was learned that its benefits are likely to get cut sooner than expected. This got Americans worried since their retirement plans have been deranged due to the ongoing Covid-19 pandemic.
Social Security in trouble
Social Security and Medicare trustees published a report stating that benefits will have to be cut by 2034 which is deemed to be earlier than anticipated. This provided that Congress fails to address Social Security’s long-term funding shortfall. Additionally, if Congress does nothing about it, the combined trust funds for the program can only pay 78 percent in promised benefits to both retirees and disabled beneficiaries.
It’s no surprise that such has been projected regarding Social Security benefits. The ongoing global health crisis caused by Covid-19 has significantly made a negative impact on the economy which led to a surge in unemployment, not to mention a declining revenue coming from payroll taxes.
Not likely to happen
The forecasted benefits reduction, however, does not translate to Social Security funds are running dry. Such a scenario is not likely to happen, according to the Chicago-based financial and tax planning firm of Monotelo.
Monotelo stated that if the current wage taxes being paid are the only ones left to Social Security by the middle of the next decade, the program still can pay up to three-quarters of the promised benefits.
Additionally, the website noted that while a 25 percent reduction in benefits could substantially hurt the retirement plans of people depending on the Social Security benefits, Monotelo claims that it is way less damaging than the program being closed down entirely.
6% COLA increase
Meanwhile, Yahoo! Finance reported that Social Security benefits would be getting a needed boost next year. This could probably be the largest push in the past four decades. Although the reported bump could be as high as 6.2 percent because of inflation, it is believed that the monthly check may not go as far as many would think.
The cost-of-living adjustment (COLA) will be calculated in 2022 as this will be based on the information through the third quarter, CNBC reports. Further, the Social Security Administration usually announces the yearly adjustment in October as this will go into full swing by January.