We have received a number of questions recently around Social Security, primarily about whether we are expecting cuts to benefits or even the elimination of the program altogether. I want to outline three reasons why you shouldn’t worry.
But first, here’s a bit of background. Recently, Elon Musk and the Department of Government Efficiency has set their sights on reforming and reorganizing the Social Security Administration. They recommended a number of moves like laying off employees and closing offices, overhauling computer systems, curtailing phone services with a stated goal of eliminating waste and inefficiency. And this has understandably generated a lot of headlines in the news. So it’s understandable why some might be confused as to the end goal of all these changes. And while anything is certainly possible, we do not see cuts to benefits as likely and we don’t recommend worrying, and here’s why.
- Reason number one, President Trump has stated repeatedly, he has no plans to reduce or eliminate Social Security benefits. DOGE is responsible for reducing inefficiency, not eliminating programs.
- Two, reducing or eliminating Social Security would be incredibly unpopular politically. Surveys show as many as 90% of Americans support the program.
- And reason number three, the impact of reducing or eliminating benefits would immediately result in 27% of senior citizens who rely on Social Security for their only monthly income to be below the poverty line. Cutting benefits for these people would create a national crisis.
Social Security has been in existence for a hundred years, and we don’t expect that to change. Now, it’s important to note that the fund that pays Social Security benefits is scheduled to be insolvent in 2033, at which point there wouldn’t be enough money to pay all of the current benefits.
This is happening because the amount paid into the program through taxes is less than the amount being paid out in benefits. However, there are a number of ways to solve or at least prolong the issue. Congress could increase the full retirement age for people who have yet to file.
They could increase the income cap on Social Security tax, or they could actually increase the percentage Social Security tax. There are quite a few ways to fix the shortfall without cutting benefits. In reality, the forthcoming insolvency of the program in less than 10 years is a bigger threat to benefits than anything being discussed by Elon Musk or the current administration.
Now, don’t expect Congress to act until we’re closer to 2033, but all this to say is if you are currently receiving benefits or preparing to begin receiving in the near future, you should not let current headlines keep you up at night and we don’t see reason to worry.
As always, you should consult with your financial advisor to be sure that you have a plan in place that fits your current situation and your goals for the future.
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