2012 Social Security Trustees Report

Here are a few brief points to remember about the 2012 Social Security Trustees report:

When they say that at X date benefits can be supported at 75%, that means that 75% of the required payroll taxes are coming in that pay for the benefits. That means there is a 25% funding shortfall … NOT that all benefits will cease as some in the media try to sensationalize. What happens is that the Trust Fund is exhausted at X date (this year’s report that date is in 2033 … it changes each year based on demographic and economic factors and assumptions).

The great debate over Social Security comes from two perspectives, Trust Fund Perspective (Trustee’s perspective of the Social Security budget), and Unified Budget Perspective (Congress’ perspective where all funds coming in are lumped into revenues and all expenses going out are lumped into expenditures (often called “investments” by Congressman these days).

Another point … claiming benefits early because Social Security has a problem is not a solution. This is an irrational fear response where people think they need to get something before it runs out. As mentioned above, funding is still projected to be there for 75% of the benefits. This means that the benefits do need to be changed so that full benefits (albeit lower) will be there for younger people by the time they reach benefit claiming age. These younger people will have time to incorporate this into their retirement planning and save more (by the way, saving more is what everybody needs to do!! See my other blogs by search term saving or contribution).

The full report can be accessed on their website.

About Larry Frank, Sr.

Larry R Frank Sr., MBA, CFP®, is an experienced financial advisor and a published author on Retirement Planning Research. Have a financial question? Click Here to Ask Larry

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