In the past few months, American seniors have been worried about their checks and the retirement system as a whole. Congress and politicians need to do something because if they don’t, retirees will likely lose benefits in the long run because the retirement system can’t support itself financially.
Also, since the global financial crisis last year, Americans’ hopes for having enough money in retirement have dropped the most. This means that cutting Social Security payments could make people lose faith in the country.
The retirement system might not have enough money in 2035, so politicians have thought about putting off the retirement age to keep the system solvent. Forbes recently said that the retirement system is hard to understand because people have to work for at least 35 years and pay a special Social Security tax.
This tax, which came from Franklin D. Roosevelt’s New Deal policies during the Great Depression, wasn’t meant to be paid backwards. Instead, it was meant to help people who were old enough to need it save for retirement.
People who get benefits from the SSA should know that it looks at the 35 years with the best earnings and compares them to the average wage for that time. This helps us figure out how much the money is worth today if the wages are the same.
Cuts will occur if the retirement system remains unchanged
A new study says that neither workers nor retirees’ trust has been restored. There are, however, some reasons to be hopeful. For example, the Employees Benefit Research Institute and Greenwald Research both say that pay growth is currently higher than inflation. Over 2,500 Americans asked said that things like rising living costs that make it harder to save are most likely to throw them off track.
The last worry comes up because the study found that both retirees and working people plan to rely on three sources of income in their golden years: Social Security, workplace retirement programs, and personal savings or investments for retirement.
Eighteen percent of workers think that Social Security will give them money when they retire, but ninety-one percent of retirees say they count on those checks. But if Congress doesn’t do anything, benefits will be cut by at least 20%. Also, Social Security payments may be changing soon because the trust funds for the retirement system will run out in ten years.
Also, Medicare’s trust fund, which pays for Part A hospital insurance, is projected to run out even faster. Craig Copeland, head of wealth benefits research at EBRI, says that other things, like changes in tax breaks for employer-based retirement plans or individual retirement accounts, could also make planning for retirement harder if they happen.
Craig Copeland also said that this could change the way people plan for retirement and how they feel about it in a big way. During a press event on Wednesday, AARP’s executive vice president and chief outreach and engagement officer, Nancy LeaMond, said that social security is always at the top of the group’s members’ lists of priorities.
In light of this and how important Social Security is, Lemond also said, “We are asking each candidate for federal office what they think about the program this cycle.”
Americans are less optimistic regarding their retirement savings
A new poll from the AARP released this week shows that Americans aged 50 and up have a less positive outlook. Twenty percent of those who responded said they did not have any savings for retirement. Also, 61% of those who answered are worried that they won’t have enough money for retirement.
According to Lea Mond, a nonprofit group that speaks up for Americans 50 and older, it is also calling on lawmakers to do something about family caregiving, which can leave women in retirement without enough money.
AARP also backs other congressional efforts to make retirement safer, such as setting up retirement savings accounts or automatic IRAs for Americans who don’t have access to employer-sponsored retirement plans.
Even though Congress just passed a bill to improve retirement security, Copeland said that people who are already retired might not get as much out of it. As part of these changes, people in their 60s can now put away an extra amount to catch up on their savings, and low-income workers can get a match.