Social Security to run out faster due to Coronavirus
LEXINGTON, Ky. (WKYT) - In 2021, social security for the first time ever will cost more to payout than the income brought in from those in the workforce. The deficit was projected prior to the Coronavirus pandemic which is only going to add fuel to the fire of social security running out. Josh Smith, financial planning advisor of Strategic Wealth Designers, talked about the significance of how losing social security will disrupt everything from retirement planning to those already in retirement.
“When social security started 42 people were paying into the system for every 1 drawing out and on top of that the average time that 1 person actually drew social security before passing was only 2 years. With people living well into their 80’s and beyond now, it’s not uncommon for someone to draw social security for 20 years and the system just wasn’t set up for that,” Smith said. “Back in the ’60s the average family hovered around 6 people and now families only have a couple of children typically and as time goes on that means a lot fewer people to pay into social security.”
With the addition of 10’s of millions being laid from the coronavirus, it could reduce funding for social security by up to an additional 3 years. For those in or nearing retirement who expected to have those funds fully available to them, Smith says they could be in for a rude awakening, “I’ve said before hope is not a strategy and right now neither is social security. If your financial plan is to retire and live off of social security now is the time to revisit that thinking. I believe a form of social security will still be around in 10-15 years but it’s going to look different than it does today, reduction day is coming.”
Congress passed the $2.2 trillion stimulus bill earlier this year and the Fed has been using all the weapons it has to keep the economy afloat as the United States has been shut down for multiple months. No one has ever run for President on the platform of raising taxes, but given the stimulus and the unfunded liabilities from social security and Medicare, taxes are going to go up according to Smith. “Taxes have been on sale for several years now and 2020 is the icing on the cake that almost certainly solidifies taxes will be going up to pay for the shortfalls we are facing in the years ahead.”
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