Millions of seniors are relying on Social Security as their main source of retirement income. The chances are many future retired seniors will be very dependent on those benefits as well.
But Social Security has its share of money challenges that might have terrible consequences for the future and current retirees. And if lawmakers in Washington don’t intervene, the results might be downright catastrophic.
There is a serious shortfall in revenue at play
Social Security mainly relies on payroll taxes to stay alive. But soon, that income stream will shrink. That is because baby boomers will be exiting the workforce in large number, and the number of workers that are going into the labor force will not come close to replacing all the retired boomers.
Meanwhile, as all the baby boomers are retiring, they will likely start claiming the SS benefits that they are entitled to claim, putting a extreme strain on the Social Security’s resources. And after the SS program’s cash reserves are depleted, Social Security might have no choice but to have universal benefit cuts.
In their newest report, the SS Trustees have estimated that the Social Security program’s trust funds will be out of money by 2034. But we cannot rule out the possibility that it will come sooner than 2034 because of the pandemic.
First of all, there are a lot of people who were unemployed for a long time in 2020 and 2021, thereby limiting how much payroll tax went into Social Security. Furthermore, there is no way to know to what extent the Covid-19 pandemic will make seniors want to take early retirement.
On the other hand, the popularity of working from home might drive some of the older employees to work a little while longer than they had planned. However, the emotional toll of the pandemic could spark an early retirement trend.
All told, SS has a very real crisis to deal with.
It was impossible to predict these extreme affects that the COVID pandemic had on the United States economy. But Social Security’s financial woes started before the pandemic by a lot of years. And at this point, we are inching very close to the point when benefit cuts might become a real possibility.