Baby boomers who haven’t yet retired, as well as early Generation Xers, are looking at Washington, D.C., with trepidation. In June 2023, the 176-member House Republican Study Committee (RSC) approved a fiscal blueprint that would raise the full retirement age to 69 for those who will turn 62 in 2033.
This measureamong other things, would reduce the number of Americans receiving Social Security benefits, reduce costs, and help balance the budget by freeing up “cash” within the system.
Americans who plan to retire within the next 10 to 15 years aren’t comfortable with that concept because it means they have to work longer to receive their full pension. advantageyou will receive less money overall.
what is on the table
The Old Age and Survivors Trust Fund, which helps finance Social Security, could run out of money within the next decade or so. In that case, Social Security would be funded solely by payroll taxes, which cover about 77% of current benefit levels. That means retirees will lose nearly a quarter of their expected Social Security income if the trust fund runs out.
The RSC report proposes significant changes to address this issue. The changes to Social Security amount to a 31% cut by 2086. These changes include raising the full retirement age, reducing benefits for above-average earners, and eliminating cost-of-living adjustments for people with disabilities. high income At the same time, we value the COLA of those who qualify.
with Alicia H. Munnell Boston University Retirement Research Center reports that the impact of these cuts could be devastating for middle-class earners because the income threshold is not as high.
She found that “mid-career workers who believe their benefits will fall to 77 percent of current levels will have an average career income of $58,700 in 2022, while ‘high’ earners who believe their benefits will fall to 40 percent of current levels will earn $9. It was $4,000. They are not wealthy people. ”
Munnell says lawmakers need to think about the big picture. retirement income structure Less than half of the private sector workforce participates in employer-sponsored retirement plans, which could pose questions when considering cuts to Social Security.
Andrew Gosselin, Senior Editor Money Co., Ltd.says that the current talks on Social Security are more than just political posturing, but instead signal “a major shift in the way lawmakers are beginning to rethink long-term debt.” In other words, further changes are likely.
Responding to change
Late baby boomers and early Gen They need to consider whether they will be able to sustain themselves on their current financial plan after quitting. work.
The consensus among financial planners is that employees should diversify their investment assets now to prepare for future changes. Tim Dorman, Investment Analyst and CEO top mobile bank Here’s some advice for those planning to retire: [their] ”
Gosselin agreed, saying workers “have to become CEOs of companies.” [their] your own financial future. ”
Other experts also acknowledge the need to diversify, including working longer hours to receive higher benefits, creating and sticking to a budget, exploring other sources of income, and avoiding high interest payments. It advises workers to consider reducing their debt now. credit card After retirement.
Some financial planners recommend cutting back on discretionary spending and downsizing your lifestyle now.Doug Carey, Founder and President wellstracea financial and retirement planning software company, says, “Consider downsizing your home or moving to a more cost-effective area.”
Founder Leo Smigel Analysis of alphaThe financial planning website advocates a more radical approach to retirement solvency, saying workers should develop “strategies robust enough to survive without the need for a government safety net.” It has said.
Like Carey, Smigel recommends downsizing your home and considering other sources of income. Smigel is also a proponent of diversifying your retirement options, including making necessary changes to your IRA and 401(k) accounts.
Both Gosselin and Dorman advise workers to stay informed about changes to Social Security laws. Gosselin says being well-informed about policy changes will help workers adapt to the changes. [them] We are unlikely to be tripped up by sudden revisions to social security or other fiscal policies…”
Doman agrees. “Being an active participant in these conversations is not only enriching; [their] Understand and amplify at the same time [their] Ability to influence change. ”
Linda Chavez CEO, Senior Life Insurance Finder The website advises people to go to the top and voice their concerns. She encourages workers to contact their local legislators and tell them how they feel about proposed Social Security and other federal legislation.
No matter how people plan their finances, the last thing they want to do is do nothing. Gosselin said: “…the old principle of “saving for a rainy day” needs to be updated.it’s more like ‘Savings Workers should start planning for their future as retirees now, even if it seems like a long way off.