Trust Fund for Old Age and Survivors | ET REALITY

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(AP) – Baby boomers who have not yet retired, as well as the first members of Generation X, are looking at Washington, D.C., with some apprehension. The 176-member House Republican Study Committee (RSC) approved a tax plan in June 2023 to raise the full retirement age to 69 for those turning 62 in 2033.

This measurealong with others, it would reduce the number of Americans receiving Social Security benefits, cut costs and help balance the budget by freeing up “cash” in the system.

Americans who plan to retire in the next 10 to 15 years are not happy with that concept, since it means they will have to work longer to receive their full salary. benefitsreceiving less money overall.

What’s on the table

The Old Age and Survivors Trust Fund, which helps finance Social Security, could run out of money in the next 10 years or so. If that happens, Social Security will be funded solely by payroll taxes, which cover about 77% of the current benefit level. That translates to retirees losing nearly a quarter of their expected Social Security income when the trust fund runs out.

The RSC report proposed significant changes to help combat this problem. The changes to Social Security amount to a 31% cut by 2086. These changes include raising the full retirement age, reducing benefits for above-average earners, and eliminating the cost-of-living adjustment for those with income above average. higher income and at the same time weight the COLA for those who do qualify.

Alicia H. Munnell with the Boston College Retirement Research Center reports that the effects of these cuts could be catastrophic for middle class people, since the income threshold is not very high.

She writes: “The median worker, whose benefits fall to 77 percent of current law, had median professional earnings of $58,700 in 2022 and the ‘high’ worker, who sees benefits fall to 40 percent of current law, gained $94,000. These are not rich people.”

Munnell says lawmakers should think of everything retirement income structure when considering cuts to Social Security, as less than half of the private sector workforce participates in an employer-sponsored retirement plan.

Andrew Gosselin, senior editor of money inc., says the current conversations about Social Security are more than just political posturing, but rather indicate “a seismic shift in the way policymakers are beginning to rethink long-term obligations.” In other words, more changes could be coming.

Responding to changes

Late-year Boomers and early Gen Xers who are considering retiring in the next two decades should start planning their budgets for what could happen if Congress approves Social Security cuts. They need to think about whether their current financial plans will keep them afloat once they stop. labor.

The consensus among financial planners is that workers should diversify their investment assets now to protect against future changes. Tim Doman, investment analyst and CEO of Top mobile banks advises future retirees that “diversifying (your) investment portfolio becomes not only a smart move but also a protective measure… This approach is particularly valuable in a climate where Social Security is no longer the safety net.” solid security as it once was.”

Gosselin agrees, saying workers must “become CEOs of (their) own financial future.”

Other experts confirm the need to diversify and also advise workers to consider working longer to receive greater benefits, create and stick to a budget, investigate other sources of income, and reduce debt now to avoid paying high interest. Credit cards after retirement.

Some financial planners also recommend cutting back on discretionary spending and lifestyle spending now. Doug Carey, founder and president of Trace wealtha retirement and financial planning software company, says, “Consider downsizing your home or moving to a more affordable area.”

Leo Smigel, founder of Analyzing Alphaa financial planning website, advocates for an even more radical approach to retirement solvency, saying workers should develop “a strategy strong enough to survive without needing a government safety net.”

Like Carey, Smigel also recommends downsizing your home and considering other sources of income. Smigel also advocates diversifying your retirement options, including making the necessary changes to an IRA or 401(k).

Stay informed

Both Gosselin and Doman advise workers to stay up to date on legislative changes to Social Security. Gosselin says that being well informed about policy changes allows workers to adapt to changes, “making them less likely to be tripped up by sudden amendments to Social Security or any other tax policy…”

Doman agrees. “Actively participating in these conversations not only enriches (your) understanding of him but also amplifies (your) ability to influence change.”

Linda Chávez, executive director of Senior life insurance finder website, advises people to go to the top to voice their concerns. She urges workers to contact their local representatives in Congress to let them know how they feel about the proposed Social Security or other federal legislation.

Contact information for all US Home and Senate members is available online. Details on all U.S. House and Senate legislation can be found online at GovTrack.

Whatever financial plans people make, the last thing they should do is do nothing. Gosselin says, “…the old axiom of ‘saving for a rainy day’ needs an update. it’s more like ‘saving for a climate change-induced downpour.’” Workers should start planning now for their future as retirees, even if that time seems far away.

This article was produced by Media decision and syndicated by The wealth of geeks.

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