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Facing Social Insecurity

What the future of Social Security means for you

Between the sequestration, budget negotiations and raising the debt ceiling, Congress has been facing one fiscal battle after another. With so much focus on federal spending and budget deficits, many are beginning to question the future of Social Security, a major federal expense.  If you are retired or retiring soon, it’s important to understand the facts about the federal benefit you’ve worked so hard to receive.  Revealed below are four common misconceptions about Social Security and the truth about this important benefit program.

Social Security is on its last leg.
While some public figures have said that Social Security is on its last leg, this is an exaggeration. Not until 2021 will annual costs exceed total income, and then trust fund assets will begin to decline. As it currently stands, the trust fund will be completely exhausted in 2033. Once this happens, Social Security will only be able to pay 75 percent of its benefits through tax income.  This means that most of today’s retirees won’t be impacted, but when trust fund runs dry in 2033, the program won’t be able to operate at the same capacity. Not for another twenty years could retirees face cuts to benefits. 

Current retirees could see their Social Security checks decrease.
While most proposals about Social Security reform focus on future generations of beneficiaries, one proposal under consideration could decrease benefits for current retirees going forward by changing how cost of living adjustments (COLA) are calculated. Typically, retirees receive an increase in their benefit check tied to the rate of inflation, or the Consumer Price Index.  The change proposed is called “chained CPI,” which measures inflation at a lower rate. Using chained CPI would allow the government to pay beneficiaries less in COLA moving forward, but it would not reduce their monthly benefit amount today.

The sequestration will impact Social Security. 
The sequestration will not impact Social Security, even though the program is one of the largest expenses for the federal government.  However, the current focus on federal spending could still bring about reform to the program. In its 2012 report, the Social Security Board of Trustees emphasized that the sooner lawmakers take action to address the longevity of Social Security, the more options and more time will be available to them to phase in the changes. The last notable Social Security reform took place in 1983, and while some of those changes took effect immediately, others are only starting to take effect now.

Social Security is enough to live on. 
Social Security was not designed to provide a retiree all the income needed in retirement.  Instead, it was intended to supplement other income sources. A common analogy is that retirement income is a three-legged stool.  Social Security is only one leg of the stool, which also includes pension or retirement savings plans and other personal savings and investments.  Right now the average annual income from Social Security is $15,144, yet many people rely solely on the benefit. Retirement savings plans such as IRAs and 401(k)s are very important when preparing for the future.

Remember that your success in retirement is determined by your own actions.  Save diligently for retirement so that you can be confident in your financial future.

ABOUT FORTUNE FINANCIAL GROUP

Christopher Scalese, financial advisor and president of Fortune Financial Group, is best known as Northeastern Pennsylvania’s Retirement Specialist. Scalese has spent the last two decades of his career assisting area residents with the financial transition from the working years to the retirement years. His primary goal is to help individuals structure their finances so that they have a steady income throughout their lifetime, while working to ensure their finances aren’t overly exposed to risk or unnecessary taxation. Scalese is an investment advisor representative, life and health insurance licensed and currently working on earning his Chartered Financial Consultant designation. Scalese received his Bachelor of Science degree in finance and Master of Business Administration degree from Wilkes University. For more information about Christopher Scalese and Fortune Financial Group, please visit www.fortune-financial.org.

Fortune Financial Group, Inc., is an independent firm with securities offered through Summit Brokerage Services. Inc., Member FINRA, SIPC.

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