The Important Talk You Should Have With Your Kids and Grandkids About Social Security
Have you had “the talk” with your kids or grandkids? We’re not referring to the birds and the bees, but rather a discussion about the future of Social Security. The Social Security Administration’s most recent report revealed that if lawmakers don’t act soon, the program will only be able to pay a portion of benefits to retirees after 2035. According to Yahoo!Finance, that could mean higher taxes, lower benefits, or both.
The acting commissioner of Social Security issued a statement recommending lawmakers “address the projected trust fund shortfall in a timely way” in order to strengthen Social Security for future generations.
What Millennials Need to Know
If Congress takes no action and the trust fund hits a deficit, Social Security will still be able to pay 80 percent of benefits using its tax income. However, that is not sustainable and future retirees will have to rely on additional sources of income.
For example, if benefits are reduced by 20 percent, the average 35-year-old millennial currently earning $50,000 will lose an estimated $13,500 in annual Social Security income in the first year of their retirement, according to a recent analysis. If they were to live to be 87 years old, that means $365,000 less over the course of their retirement.
What’s the Answer?
Increasing Social Security’s tax revenues is the simple solution. Not only would this address the shortfall, but it would also restore solvency as the population ages.
The Seniors Trust supports the Social Security Expansion Act. Rather than instituting an across the board payroll tax increase, this bill will require the wealthiest Americans to pay their fair share. This legislation would lift the income tax cap, which currently stands at $147,000, and subject all income above $250,000 to additional Social Security Payroll tax. Under this bill, more than 93 percent of households would not see their taxes go up by one penny.
When passed, the Social Security Expansion Act will extend the solvency of the Social Security trust fund through 2096 — ensuring it is there for your children and/or grandchildren.
