Social Security is one of the most important programs in this country. Since its inception, it has existed to provide retirees with a livable income and to provide financial assistance through disability benefits for those who can no longer work due to severe illness or injury. Recent statistics indicate that currently more than 60 million people receive Social Security benefits. Most retirees who collect Social Security benefits earn approximately $16,500 per year, which is a substantial amount of income. It can be hard to determine what the future of Social Security will look like. But, experts believe that the information below is a good indication of where it will be in the next five years.
Is Social Security in Trouble?
For many years, there has been a fear that Social Security is running out of money to dole out to retirees. The reason why there is less money than before is that the Baby Boomer generation is continuing to age and collect their benefits. Also, the more affluent retirees are living longer and their share of Social Security is larger than their lower-income counterparts. At the same time, there are fewer employees available to pay into the system to keep up with the money that is going out in monthly payments. Trustees project that the $2.85 trillion dollars in Social Security’s Trust may be exhausted by 2034, leading to severe cuts in Social Security payments for future retirees.
Upcoming Trends for the Next Five Years
The year 2034 is still a long way away, here are some projections that are possible within the next five years.
A surge in the number of eligible retired workers
There is no doubt that the number of eligible Social Security recipients is on the rise. By the year 2022, there can be as many as 50 million eligible retired workers who are claiming benefits.
Higher Cost of Living Adjustments (COLAs)
During the span between 2010 and 2016, there were three years when Social Security gave no COLAs. In 2017, the COLA was a meager .3%. However, in the coming years, you can expect to see a rise in annual COLAs in Social Security payments thanks to a marked rise in the economy.
No real benefit growth
Even though there will be steady COLAs over the next few years, there will be no actual growth because of it. Medicare B payments are automatically withdrawn for most people, and the COLAs will do little more than covering the rise in those payments.
Lower interest income from Old-Age Survivors and Disability Insurance (OASDI)
OASDI is set to see some big changes starting in the next three years. In 2020 OASDI will be paying out more in benefits than it takes in from payroll taxes and the interest it earns on its asset reserves. So, by 2022, there will be a noticeable drop in the money it has with which to work.
Minimal progress from Washington
It is unlikely that the politicians in Washington will make any changes to improve the Social Security situation. This assumption is purely based on the fact that no significant changes have been made to the Social Security system in the last 34 years.
For more information about how Social Security will change over the next five years, contact the Clauson Law Firm today.