Fearing Social Security Benefits Will Run Out, Young Workers Are Saving More
Digest
The Wall Street Journal's Money Briefing discusses the future of Social Security, a program that Americans contribute $1 trillion to annually through payroll taxes. Despite this, many workers fear there won't be any benefits available for them when they retire. While the program's trust funds may run out of money if the government doesn't take action, the program itself is not expected to run out of money. This distinction is important, as the majority of Social Security funding comes from payroll taxes, which are not expected to go away anytime soon. The trust fund is projected to run out in 10 years, at which point benefits may be reduced. Some workers are saving more for retirement in anticipation of this, while others are finding it difficult to plan for retirement without knowing the future of Social Security. While there are no concrete political plans to address the program's finances, both President Biden and former President Trump have stated their opposition to cutting benefits. Biden has suggested raising taxes on higher income earners, while Trump has not provided specific details. Some Republicans have proposed raising the retirement age, but no immediate solutions are on the horizon.
Outlines
Social Security Funding
This Chapter discusses the funding of Social Security, highlighting the $1 trillion Americans contribute annually through payroll taxes. It also explores the concerns of many workers who fear the program will run out of money before they retire.
Social Security's Future
This Chapter delves into the complexities of Social Security's future, explaining the distinction between the program's trust funds and its overall funding. It clarifies that while the trust funds may run out of money, the program itself is not expected to run out of money. The chapter also discusses the projected depletion of the trust fund in 10 years and the potential for reduced benefits.
Political Debate and Solutions
This Chapter examines the political debate surrounding Social Security's finances. It highlights the lack of concrete plans to address the program's funding challenges, emphasizing the political risks associated with altering such a popular program. The chapter discusses the positions of President Biden and former President Trump, as well as proposals from some Republicans, but concludes that no immediate solutions are on the horizon.
Keywords
Social Security
Social Security is a federal program in the United States that provides retirement, disability, and survivor benefits to eligible Americans. It is funded through payroll taxes paid by both employers and employees. Social Security is a vital part of the social safety net for millions of Americans, providing financial security in retirement and during times of disability or loss.
Payroll Taxes
Payroll taxes are taxes levied on wages and salaries. In the United States, payroll taxes are used to fund Social Security and Medicare. Employers and employees typically split the cost of payroll taxes, with each party paying a percentage of the employee's wages. Payroll taxes are a significant source of revenue for the federal government and are essential for funding important social programs.
Trust Funds
Trust funds are accounts that hold assets, such as stocks, bonds, and other investments, that are set aside for a specific purpose. In the context of Social Security, trust funds are used to cover the difference between the amount of money paid out in benefits and the amount of money collected in payroll taxes. The trust funds are expected to run out of money in the future, which could lead to reduced benefits.
Retirement Age
The retirement age is the age at which individuals become eligible to receive full Social Security benefits. The retirement age is currently 67 for individuals born in 1960 or later. Some proposals have been made to raise the retirement age, which would mean that individuals would have to work longer before they could receive full benefits.
Joe Pinsker
Joe Pinsker is a personal finance reporter for The Wall Street Journal. He is an expert on Social Security and other financial topics. In this podcast episode, he provides insights into the current state of Social Security and its future prospects.
Q&A
How much money do Americans contribute to Social Security each year?
Americans contribute about $1 trillion a year to Social Security through payroll taxes.
Is Social Security going to run out of money?
No, the program itself is not expected to run out of money. However, the trust funds that are used to cover the gap between benefits paid out and payroll taxes collected are projected to run out in 10 years.
What are some of the concerns about Social Security's future?
Many workers fear that there won't be any benefits available for them when they retire. This fear is fueled by decades of government warnings about the program's trust funds running out of money. Some workers are saving more for retirement in anticipation of reduced benefits.
What are some of the potential solutions to address Social Security's financial challenges?
President Biden has suggested raising taxes on higher income earners, while some Republicans have proposed raising the retirement age. However, there are no concrete political plans on the horizon.
What is the likelihood of receiving nothing from Social Security in the future?
Experts believe that the chances of receiving nothing from Social Security are basically zero. They compare it to a 'zombie apocalypse' scenario, which is highly unlikely.
Show Notes
In a recent Gallup survey, about 47% of working Americans said they feel Social Security won’t be able to pay them benefits when they retire. Wall Street Journal personal-finance reporter Joe Pinsker joins host J.R. Whalen to discuss common misunderstandings about the program’s future, and how some workers are making adjustments to the way they save for retirement.
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