David shares that the 2022 Trustees Report raises a sharp warning cry about the catastrophic short- and long-term trajectories of the Social Security program.
The surplus that had built up over the years as Baby Boomers plowed money into the Social Security program is beginning to draw down as the same Baby Boomers are moving out of the workforce at the tune of 10,000 per day.
David talks about the fact that, at the current pace, the trust fund will run out in 2035, and the incoming revenue based on the current levels of taxation would only be enough to pay 80% of scheduled benefits.
Historically, Social Security has provided the average retiree with roughly 38% of their average income during their working years – that number should go down to 27% by 2035. This means that Social Security will be playing a smaller and smaller role and that you’ll have to save even more of your paycheck in order to compensate.
For Social Security to remain fully solved throughout the next 75-year project (ending in 2096) there are three possibilities.
David raises a key concern that’s brought into the conversation by Social Security Trustees: if Congress acts now, the pain of fixing this program can be spread among Baby Boomers, Gen X’ers, Millennials, etc. However, for each year that goes by without a permanent fix for the Social Security program, the pain will get concentrated on fewer and fewer generations.
This means that the longer Congress waits, the higher the taxes these younger generations can expect and the lower their Social Security benefits.
David recommends doing two things from a retirement perspective: save money today to be less reliant on Social Security during your retirement, and invest tax-free.
Mentioned in this episode:
David’s books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram