Social Security Benefits in America are unique to most people, who depend on them for part of their retirement income. Yet these days, changing demographics and usual economic conditions are raising questions about whether this program will see the turn of the next century.
For this reason, policymakers seem to be engaged in a considerable debate that revolves around the issue of future changes in Social Security Benefits. Being aware of the changes allows for preparation toward considering oneself sufficiently secure from a financial point of view, while amendments to the program linger on.
Factors Influencing Social Security Benefits
Demographic and economic variables furnish the groundwork for any proposed amelioration of Social Security. Decreasing fertility and increasing longevity have increased the retiree dependency on Social Security. Society-wise and demographically, an increasingly aged population with increasing longevity speedily runs down any surpluses caused by retirements on Social Security.
Publicly, the aging populace straining any trust fund that could otherwise operate provides tremendous pressure in keeping the program alive. Thus, life expectancy directly translates to extra years of benefits payment, hence the pressure on the system. Economic changes are partly reflected by the recent 500-point move on the Dow Jones because of UnitedHealth’s earnings report, which highlights the volatility of the market regarding any program funding.
Inflation
Inflation will further come into play with annual cost-of-living increases (COLAs) meant to rescue Social Security over time. The UK had its rate of inflation decreased to 2.6 percent, which only reflects a portion of the inflation that is putting pressure to bear on benefit increases.
Further ahead is the link for further discussion explaining how to have COLA. The Congressional Budget Office indicates that, absent reforms, Social Security trust funds will be exhausted by 2034, thereby creating an environment in which reform would be urgently required.
Possible Changes To Social Security Benefits
Any one of the other very possible proposals, in my opinion, would involve adjusting the retirement age. Presently, one receives full benefits at the age of 66 or 67; under a retirement age adjustment, benefits would be received for a shorter time with the deferral of benefit payments. While it may be the fairest option in consideration of longer life expectancies, the increased benefits for postponement options may slight some people in less-than-desirable occupations.
Another option may deal with altering the benefit formula, and quite a number of changes–like the proponents invoking a replacement rate–or even completely stopping benefits for high-income earners–might keep it going for another day. Again, there are modifications proposed for the annual COLA adjustment; BOM formula update to reflect actual costs of living would yield relatively small annual increases–especially during periods of low inflation.
While options may require policymakers to consider increasing either the payroll tax or the maximum taxable earnings, so that increased funds would be directed toward future Social Security Benefits, CBO Long-term Projections will add to the details in that respect.
Final Thoughts
Legislation determines the very essence of the future of Social Security benefits. For now, individuals are to remain awake and think toward ever newer options for retirement income. In this regard, financial consultants would surely expedite the process of helping one plan for such possible reforms.
Keeping up with emerging changes in policy is vital. Such advanced efficacy will shield one from possible future drawbacks. An article regarding the recent report about UK inflation and the fall in the Dow Jones will provide a better perspective.
