Workers face many concerns as they prepare for retirement, but some of the most urgent is when it comes to social security. Nearly three-quarters (71%) of workers say they are concerned that Social Security will not be available to them when it's time to retire, a recent survey by Wells Fargo revealed.
Without the lack of gloom and doom headlines that promise the demise of the program, it is understandable to worry about the future. Especially if you are going to depend on your benefits for ending retirement, you may be concerned that you cannot afford to retire if Social Security is no longer around.
However, although the Social Security program has a fair share of problems, there is no need to worry about the future. Here's why.
The good news: Social Security is not going anywhere
You have probably heard that Social Security is bankrupt and your future benefits are at risk . However, the good news is that the program itself is not going anywhere.
When you pay your Social Security taxes as an employee, the money is not saved to an individual account just for you, which you can press once you are ready to start claiming benefits. Rather, it is paid to current pensioners in the form of monthly benefit checks. So when you're ready to retire, the checks you receive are funded by younger workers' taxes.
This means that as long as workers continue to pay the tax, there will always be cash that can be paid out as benefits. In other words, the program is not on the verge of collapse, as many soon-to-be retirees are concerned.
However, the not so good news is that the program is facing a slight hiccup: There is currently not enough money to go around. When baby boomers retire (worth around 1[ads1]0,000 workers each day, according to the Pew Research Center), a lot of money has to be paid out as benefits. And with retirees living longer than ever, today's seniors receive more monthly checks than previous generations.
As a result, more money is flowing out of the system than entering again. To cover the shortage, the Social Security Administration has dipped into the trust funds. However, these funds are expected to run dry by 2035, the latest report from the Social Security Administration Board of Trustees revealed. Once these trust funds are depleted, the only money available to pay in benefits will be what comes from taxes – and it is currently estimated that future taxes will be enough to cover only about three-quarters of planned benefits.  The bad news: Retirees may be cut for benefits
There are a couple of potential solutions to cash shortages that plague the Social Security Administration. For example, Congress may increase taxes, which will provide more money that can be paid out as benefits. Or the Social Security Administration can cut benefits because there is not enough money to go around.
No one knows exactly what will happen in the future, but if you are approaching retirement age, it is a good idea to be prepared for a possible scenario. If you bank on being able to survive on social security benefits first and foremost and realize that your checks will be reduced by 25%, this can ruin your entire pension plan.
One way to prepare for potential cuts is to bulk up your savings so that you are not forced to rely too much on the Social Security. Anyway, your benefits are designed to replace only 40% of early income, so if you play it even more conservatively and assume that they will only make up a small portion of your income when you retire, you won't be left behind. if your checks are reduced.
Another option is to take advantage of delayed pension credits. If you claim benefits at full retirement age (FRA), you will receive the full benefit amount that you are theoretically entitled to. But the Social Security Administration rewards those who delay claims for benefits after FRA, up to 70 years. If you have an FRA of 67 years and you wait for 70 years to claim, for example, you will receive an additional 24% each month on top of your entire amount. In case benefits are diminished, the promise you get by waiting to claim, can take the sting out of the cuts.
It may be daunting to think about the future of Social Security, but the positive news is that you I still want some kind of benefits you can count on when you retire. It may not be as much as you expected, but if you start adjusting your plan now to account for potential reductions, you can prepare for any obstacles your life throws you.