If you're busy saving for retirement and protecting your retirement savings, you might only be vaguely aware of recent discussions about Social Security.
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Many people putting money in money market accounts and looking for the best CD rates for their retirement savings may not be counting on Social Security to help them maintain their standard of living in retirement. They figure they will have to provide for themselves.
But about half of Americans start collecting benefits as soon as they're able--at the age of 62--because in many cases that Social Security check is the primary income. What's more, Social Security is likely to become more and more important to baby boomers, many of whom have not saved enough for retirement. According to the Center for Retirement Research, the gap between how much retirees will need and how much they've saved is $6.6 trillion.
The future of Social Security has become a hot topic in American politics in recent months after President Obama's deficit commission last summer recommended deep cuts in it as a way to reduce the federal deficit.
Although Social Security, funded through Social Security taxes, has plenty of money to cover benefits for the next 30 years, it is expected to start falling short of its obligations by 22 percent in 2037. According to the New York Times, there will only be enough taxes collected to pay out 75 percent of benefits by 2083. So something will have to be done.
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What's down the road for social security?
Most experts agree that the only way to protect Social Security is to cut benefits, raise revenue or do a combination of both. Doing nothing, experts say, isn't an option. So look for these possible changes down the road:
- A later retirement age. House Republican leader John Boehner from Ohio has already suggested raising the age of retirement to 70 for people who are at least 20 years from retirement now.
- Reductions in inflation adjustments.
- Staggered benefits so wealthier Americans get smaller benefits than those in more need.
- Switching to a more accurate inflation measurement and broadening the payroll tax base.
It's not likely Congress will ever do away with Social Security; too many people need it. According to Newsday, about half the workforce has no pension or retirement savings, and employers continue to do away with private pensions and 401(k) plans. But that doesn't mean you can count on it.
So keep filling up those money market accounts and savings accounts. Chance are you're going to need them.
The original article can be found at Money-Rates.com:
"Worried about Social Security? You're not alone"