Social Security and Retirement
Anyone approaching retirement is sure to have social security on the brain. And why shouldn’t they? Planning ahead for one’s retirement in terms of social security benefits is completely logical and productive. However, with the current condition of the nation’s recession and the uncertainty of financial security, many retirees are left with several questions.
A Washington Post article discusses some issues and prospective plans to help prevent the Social Security Trust Fund from ruin in years to come. A group of 15 military officers and government employees at the Industrial College of the Armed Forces estimated that in 2041, the Social Security Trust Fund will practically be nonexistent if nothing is done now. Based on the article, the meeting was initially organized as a way to establish a national security strategy for the U.S. in which the stability of our economy, social security included, has significant influence.
A few solutions presented by the group focus on decreasing the rate that benefits have been adding up. The group proposes connecting the growth of benefits to the price index instead of the wage index since wages often increase at greater rates than prices. Another point involves raising Social Security payroll tax based on the idea that gradually raising payroll tax coverage to 100% of earnings would help compensate for anticipated deficits. As of now, payroll tax applies to earnings of up to $106,800. One idea is to take away this limit so that those making more would pay 6.2% tax on what they earn.
While these prospective ideas involve several complexities, it will be interesting to see how the debate continues, especially as talk of raising the retirement age circulates. Considering that life expectancy has increased by 15 years (and gratefully so) within the 70 years that Social Security has been active, there is potential for the age to be set at 69 at a much faster pace than many people originally anticipated. In what is referred to as “means testing,” the group has recommended providing lower social security payments to those who earn higher amounts. The idea is that this would motivate such individuals to spend less and instead save more for retirement so they can retire at a later point.
While only time and more deliberating will tell whether some, if any, of these plans will go into effect, those reflecting on retirement would be well advised to do their research. It also can’t hurt to stay positive and take a glass-half-full attitude while considering potential options.
Michael Monheit is the managing lawyer at Monheit Law, outside Philadelphia, Pennsylvania. He has practiced law since 1989. Michael Monheit was the managing attorney of the law offices of Herbert Monheit — now Silverman and Fodera — a firm... Michael Monheit→