The future of Social Security is a concern for many Americans, especially those in Generation X who are next in line to retire. Experts have differing opinions on whether Gen Xers should be worried about receiving their full benefits. Krisstin Petersmarck, an investment advisor representative at New Horizon Retirement Solutions, says there is a real risk that Gen X recipients will see reduced benefits if the current funding system isn’t overhauled.
“The largest factor affecting the Social Security system is that there are more workers leaving the workforce and claiming benefits than there are workers entering the workforce and paying into the system,” she explained. Sara Levy-Lambert, head of operations at Awning.com, notes that wage growth has not kept up with inflation in recent years, meaning less money has been coming into the program through payroll taxes. Lengthening life expectancies have also put pressure on the system, with more retirees drawing benefits for longer periods of time.
Kevin Thompson, a CFP with 91 Capital Group LLC, believes a reduction in benefits is “absolutely real” if there is no significant change in the current funding.
Gen X Social Security concerns
The Social Security Trust could become insolvent by 2033 or 2034, potentially leading to a significant reduction in benefits for beneficiaries.
Experts agree that raising taxes is the most realistic reform to the Social Security system. A higher wage base on the taxable Social Security amount seems to be the only answer that could quickly resolve this issue,” Thompson said. To plan for potential reductions, Petersmarck suggests diversifying retirement planning by maxing out 401(k) and IRA contributions and investing in after-tax accounts.
Levy-Lambert recommends investing in appreciating assets like a home, stocks, or mutual funds to provide a hedge against projected deficits. Thompson notes that Schedule C-filing business owners may have tax-saving strategies available to them. Ultimately, experts advise planning to live on fewer Social Security benefits while hoping for the best.
Image Credits: Photo by Christian Erfurt on Unsplash
