Ready or not, folks, we’re less than 15 months away from the 2020 elections. And while there are a number of hot-button topics for candidates from both parties to discuss, the future of Social Security, and how immigration impacts our nation’s most successful social program, are two topics that rightly deserve their time in the spotlight.
Are you prepared for a 23% cut to retired worker benefits?
As many of you are probably aware, Social Security is facing its toughest challenge in more than eight decades because of a number of ongoing demographic changes. The newest Social Security Board of Trustees report found that the program will begin spending more than it brings in via revenue beginning in 2020. To provide some context, this’ll be the first time the program has had a net cash outflow since 1982.
With each passing year, this net cash outflow from Social Security is expected to grow larger, dwindling the program’s nearly $2.89 trillion in asset reserves in the process. By the time 2035 rolls around, the trustees have forecast that Social Security’s excess cash built up since inception will be completely gone.
Now, Social Security not having a dime in asset reserves doesn’t mean the program is insolvent or bankrupt. Social Security’s two recurring sources of revenue — the 12.4% payroll tax on earned income, and the taxation of benefits — ensure that bankruptcy is impossible, since there will always be money flowing into the program for disbursement to eligible beneficiaries. But it does demonstrate that the current payout schedule isn’t sustainable over the long-term, which is defined as the next 75 years.
Should Social Security’s asset reserves be whittled away, the trustees have projected the need for an across-the-board cut in benefits for retired workers of up to 23%. That’s a problem considering that more than 3 out of 5 retirees lean on Social Security for at least half of their monthly income.
Setting the record straight on immigration
The questions we should be asking are: “What do we do about Social Security?” or “How do we fix it?”
By Sean Williams for THEMOTLEYFOOL.COM
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